ABC Inc. Distributes 70 % of its profits and uses the rest in the operations of the business. The current year dividend rate per face value is and the 40 %. The profitability of total assets is 25 %. Compute the intrinsic value of a share of ABC for an investor whose minimum required rate of return is 32 %.

ABC Inc. Distributes 70 % of its profits and uses the rest in the operations of the business. The current year dividend rate per face value is and the 40 %. The profitability of total assets is 25 %. Compute the intrinsic value of a share of ABC for an investor whose minimum required rate of return is 32 %.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 8P

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Newdeal Inc. follows a policy of distributing 45% of its profits and investing the rest in the operations of thecompany. The average profitability of its assets is 20% and the current year dividend per face value of 1₺ is30%. Compute the intrinsic value of a stock of this company for an investor whose minimum required rate ofreturn is 25%.b) Compute the value of this stock one year later under the same assumptions.
In previous years, Cox Transport reacquired 4 million treasury shares at $20 per share and, later, 2 million treasury shares at $26 per share. If Cox now sells 2 million treasury shares at $29 per share and determines cost as the weighted-average cost of treasury shares, by what amount will Cox’s paid-in capital - share repurchase increase?
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In previous years, Cox Transport reacquired 2 million treasury shares at $20 per share and, later, 1 million treasury shares at $26 per share. By what amount will Cox’s paid-in capital—share repurchase increase if it now sells 1 million treasury shares at $29 per share and determines cost as the weighted-average cost of treasury shares?
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