When it started a few years ago, a firm issued shares at $2.00 a share and raised $600,000 in equity. These shares now trade at $6.00 a share on the open market. The debt equity mix is currently 10%. The firm has generated a net profit of $150,000 this year and as a rule pays out 50% of its profits as dividends to shareholders. How many shares are there in issue?
There are 300,000shares in issue ($600,000 / $2.00 ) And we pay $150,000/ 300,000 = $0.5 per share