Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.7 million shares that are outstanding. Shareholders required a 10 % rate of return on consolidated stock. A. What is the price of Consolidated stock? B. What is the total market value of its equity? Consolidated now decides to increase next year’s dividends to $20 a share, without changing its investment or borrowing plans. Thereafter, the company will revert to its policy of distributing $10 per year. C. How much new equity capital will the company need to raise to finance the extra dividend payment (enter answer in millions). D. What will be the total present value of dividends paid each year on the new shares that the company will need to issue (answer in millions)? E. what will be the transfer of value from old shareholder to new
Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.7 million shares that are outstanding. Shareholders required a 10 %
Consolidated now decides to increase next year’s dividends to $20 a share, without changing its investment or borrowing plans. Thereafter, the company will revert to its policy of distributing $10 per year. C. How much new equity capital will the company need to raise to finance the extra dividend payment (enter answer in millions). D. What will be the total present value of dividends paid each year on the new shares that the company will need to issue (answer in millions)? E. what will be the transfer of value from old shareholder to new shareholder (answer in million)?
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