Essay About Hutchisons Future Projects And Internal Generated Capitals

Hutchison Case Study
Question 1:
New shares issue
Outstanding shares = 2000 million
A new shares issue at $48.8
Total capital raised = $1 billion = HKD$ 7800 million
Total shares issued = 159.8 million
New share capital = HKD$ 8704 million
(Hong Kong corporate tax rate at 16.5 percent (in 1996)
Profit after taxation = 7800*(1-16.5%) = 6513
Assume stable growth of 10%
Profit for the year retained = 6513*60% (Dividend policy 2:3)+5300*1.1 = 9521.6
Shareholder equity at the beginning of the year = HKD$ 904 million;
Ending Shareholder equity (after the new share issues) = HKD$ 8704 million
Return on Equity = 9521.5 / (904+8704)/2 = 1.98
Financial leverage = 26174/(8704+Reserve*1.1) = 0.3
PERFORMANCE DATA
Earnings per share
Dividends per share
Dividend cover
Return on shareholders funds
Current ratio
Long-term debt issue:
Interest cost : HIBOR+70bps = 5.32%+0.7% = 6.02%
(Hong Kong corporate tax rate at 16.5 percent (in 1996)
Profit after taxation = 7800*(1-6.02%)*(1-16.5%) = 6121
Assume stable growth of 10%
Profit for the year retained = 6121*60% (Dividend policy 2:3)+5300*1.1 = 9502.6
Return on Equity = 9502.5 /904 = 10.51
Financial leverage = (7800+26174)/58839 = 0.6
Question 2:
Future financing needs: Since the internal generated capitals are not sufficient for Hutchisons future projects, it is reasonable to focus on generate enough capital