Bonus issue the share price should fall

Assignment Help Corporate Finance

Reference no: EM13214933

The company was considering a 1 for 1 bonus issue. On the day of record, the market price of its shares was 20 yuan. One financial analyst commented: "P/E ratio of SOUAET shares is 20, based on the current share price. After the bonus issue the share price should fall to 10 yuan, with the result that the P/E ratio should fall to 10. That will increase the marketability of SOUAET shares". Is the comment on the P/E ratio correct? Provide reasons.

Reference no: EM13214933

Questions Cloud

Rogers and freud disagree : About which of the following statements would rogers and Freud disagree?

Explain the company wishes to know the market value : An oil company has paid $100,000 for the right to pump oil on a plot of land during the next three years. A well has already been sunk and all other necessary facilities are in place. The land has known reserves of 60,000 barrels. The company wish..

How many units are budgeted for sale in october : Foyert Corp requires a minimum $30,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at month-end. The cash balance on October 1 is $3..

Explain the risks associated with leveling resources : Explain the risks associated with leveling resources, compressing or crashing projects and imposed durations or “catch-up” as the project is being implemented

Bonus issue the share price should fall : One financial analyst commented: "P/E ratio of SOUAET shares is 20, based on the current share price. After the bonus issue the share price should fall to 10 yuan, with the result that the P/E ratio should fall to 10.

Explain what is the net income of the firm for the year : cost of goods sold, $450,000 in operating expenses (including a depreciation expense of $150,000), with a tax liability equal to 35% of the firm's taxable income. What is the net income of the firm for the year?

How does this revenue mix compare with the revenue blend : An opportunity exists to explore the greater social and political questions that are frequently debated about the compatibility of profit-oriented entities and quality of health care, relative to not-for-profit entities.

Boxes into a concept map : Arrange the following boxes into a concept map. Connect the boxes that relate to each other with arrows. In the box below the map, give a brief explanation of your map, telling why you made specific choices

Compute the return on berry stock for each year : Calculate the return on berry stock for each year, the average return for the period, and the standard deviation for the period.

User Account

All Pages