A company decided to go public.

At that time, net income available to common shareholders amounted

to P300,000. The number of common shares issued and outstanding is 125,000.

1. Assume that the pay-out ratio is 60%, how much of the total dividends shall a shareholder owning
10,000 common shares receive? Total dividends= (DPR)(Net income) Total dividends= (.60)(300,000)
Total dividends=P180,000 =(10,000/125,000)(180,000) The amount of total dividends that the
shareholder owning 10,000 common shares shall receive=P14,400

2. Assume that the pay-out ratio is 60% and the price per share is P20, what is the dividend yield?
Dividends yield=annual dividends per share/Price per share Dividends per share=Total dividends paid
out/Total outstanding shares Dividends per share=180,000/125,000 Dividends per share=P1.44
Dividends yield=1.44/20 Dividends yield=7.2%

3. Assume that the price-earnings ratio will be set 12 times and 25,000 new shares will be issued: 3a.
How much is the initial public offering per share of the 25,000 new shares? Price per share=(price-
earnings ratio)(earnings per share) Earnings per share=Net income-Preferred Dividends/End of Period
Common Shares Outstanding Earnings per share=300,000-0/125,000 Earnings per share=P2.4 Price per
share=(12)(2.4) Price per share/Initial public offering per share=P28.8

3b. How much is the net proceeds from the issuance if underwriter spread is 2%? =(25,000)(28.8)
=(720,000 )(1.02) =P734,400