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Currently, T&F's stock is trading at $0.65 per share and the number of outstanding ordinary shares is 200 million.

Currently, T&F's stock is trading at $0.65 per share and the number of outstanding ordinary shares is 200 million.  Given that borrowing are on floating-rate, the carrying amounts approximates market value. You may assume the company is operating at its optimal capital structure and that the discretionary financing needs for FY 2017 is about $4 million.

Management is contemplating reducing dividends so that the profit can be used to meet the firm's financing needs.

(a) Calculate the amount of equity and debt to be raised for FY 2017. (10 marks)


(b) Analyse in a balanced manner whether the management of T&F should reduce its dividends. (15 marks)

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