The following financial information relates to YNM Co, which has a cost of equity of 12%. Assume that it is now 31 March 2011 and that the ordinary share price of YNM Co is $4·17 per share. YNM Co has been experiencing trading difficulties due to a continuing depressed level of economic activity: Income statement information for recent years ending 31 March Note: the statement of financial position takes no account of any dividend to be paid. The ordinary share capital of YNM Co has not changed during the period under consideration and the 8% bonds were issued in 1998. Dividend and share price information Financial objective of YNM Co YNM Co has a declared objective of maximising shareholder wealth. (1) To pay the same total cash dividend as in 2010 (2) To pay no dividend at all for the year ending 31 March 2011 Financing decision YNM Co is also considering raising $50 million of new debt finance to support existing business operations. Required: (a) Analyse and discuss the recent financial performance and the current financial position of YNM Co, commenting on: (i) achievement of the objective of maximising shareholder wealth; (ii) the two dividend choices; (iii) the proposal to raise $50 million of new debt finance. (13 marks) (b) Discuss the following sources of finance that could be suitable for YNM Co, in its current position, to meet its need for $50m to support existing business operations: (i) equity finance; (ii) sale and leaseback. (6 marks) (c) Explain the nature of a scrip (share) dividend and discuss the advantages and disadvantages to a company of using scrip dividends to reward shareholders. (6 marks)