Required information [The following information applies to the questions displayed below.] Sammy's Sportshops has been very profitable in recent years and has seen its stock price steadily increase to over $100 per share. The CFO thinks the company should consider either a 100% stock dividend or a 2-for-1 stock split. 2. The primary reason companies declare a large stock dividend or a stock split is to lower the trading price of the stock to a more acceptable trading range, making it attractive to a larger number of potential investors. True or False True False
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- A company has just announced a 3-for-1 stock split,effective immediately. Prior to the split, the companyhad a market value of $5 billion with 100 millionshares outstanding. Assuming the split conveys no newinformation about the company, what are the value ofthe company, the number of shares outstanding, andthe price per share after the split? If the actual marketprice immediately following the split is $17.00 pershare, what does this tell us about market efficiency?Presently, your company’s Face Value of Equity Share RO 10 and Market Value of your Share in MSM is RO 25 per share. In order to increase the trading volume and market liquidity of your company stock, will you suggest the management to go for stock split? Explain your management about concept of stock slip with the advantage of splitting the stock of your company with the current scenario.I need to know the formulas on how to solve the 3 parts below. I have the answers but I do not know how to solve these problems. (Common stock valuation) Dubai Metro's stock price was at $100 per share when it announced that it will cut its dividend for next year from $10 per share to $6 per share, with additional funds used for expansion. Prior to the dividend cut, Dubai Metro expected its dividends to grow at a 4 percent rate, but with the expansion, dividends are now expected to grow at 7 percent. How do you think the announcement will affect Dubai Metro's stock price? Question content area bottom Part 1 a. What is the investor's required rate of return for Dubai Metro's stock? 14.0014.00% (Round to two decimal places.) Part 2 b. What would be the price of Dubai Metro's stock if they cut the dividend to $6? $85.7185.71 (Round to the nearest cent.) Part 3 c. How do you think Dubai Metro's stock price will react to the…
- Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases. Consider the following case: Tolbotics Inc. currently has 15,000 shares of common stock outstanding. Its management believes that its current stock price of $90 per share is too high. The company is planning to conduct stock splits in the ratio of 4 for 1 as described in the animation. If Tolbotics Inc. declares a 4-for-1 stock split, the price of the company’s stock after the split, assuming that the total value of the firm’s stock remains the same after the split, will be ________ Fuzzy Muffin Manufacturing Company is one of Tolbotics’s leading competitors. Fuzzy Muffin’s market intelligence research team shares Tolbotics’s plans of announcing a stock split, influencing the distribution policymakers. Consequently, executives at Fuzzy Muffin decide to offer stock dividends to its shareholders. Fuzzy Muffin currently has 1,900,000 shares of common stock…You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s financial statements: Year 20X1 20X2 20X3 Operating income $ 18,000,000 $ 16,000,000 $ 14,000,000 Interest 6,500,000 5,500,000 3,300,000 Taxes 4,200,000 4,800,000 5,400,000 Preferred dividends 1,500,000 800,000 700,000 Common dividends 2,500,000 3,500,000 — Round your answers to two decimal places. 20X1: 20X2: 20X3: What does your analysis indicate about the firm’s capacity to pay preferred stock dividends? Times preferred dividend earned has (declined or increased) each year, which indicates the firm's capacity to pay the dividend has (diminished or improved)You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. To help allay that fear, you compute the times-preferred-dividend-earned ratio for the past three years from the following data taken from the firm’s financial statements: Year 20X1 20X2 20X3 Operating income $ 14,000,000 $ 13,000,000 $ 13,000,000 Interest 4,600,000 3,200,000 4,600,000 Taxes 3,700,000 5,100,000 3,900,000 Preferred dividends 1,200,000 1,200,000 1,500,000 Common dividends 2,100,000 3,100,000 — Round your answers to two decimal places. 20X1: 20X2: 20X3: What does your analysis indicate about the firm’s capacity to pay preferred stock dividends? Times preferred dividend earned has each year, which indicates the firm's capacity to pay the dividend has .
- Gamma Industries has net income of $300,000, and it has 1,875,000 shares of common stock outstanding. The company's stock currently trades at $42 a share. Gamma is considering a plan in which it will use available cash to repurchase 10% of its shares in the open market at the current $42 stock price. The repurchase is expected to have no effect on net income or the company's P/E ratio. What will be its stock price following the stock repurchase? Do not round intermediate calculations. Round your answer to the nearest cent. $Beta Industries has net income of $2,000,000 and it has 1,000,000 shares of common stock outstanding. The company’s stock currently trades at $32 a share. Beta is considering a plan in which it will use available cash to repurchase 20% of its shares in the open market. The repurchase is expected to have no effect on either net income or the company’s P/E ratio. What will be its stock price following the stock repurchase?Downie Foods recently completed a 4-for-1 stock split. Prior to the split, its stock sold for $70 per share. If the firm's total market value increased by 5% as a result of increased liquidity caused by the split, what was the stock price following the split?
- ABC recently completed a 5-for-1 stock split. Prior to the split, its stock sold for P120 per share. If the firm's total market value increased by 15% as a result of increased liquidity and favorable signaling effects, what was the stock price following the split?The board of Wicker Home Health Care, Inc., is exploring ways to expand the number of shares outstanding in an effort to reduce the market price per share to a level that the firm considers more appealing to investors. The options under consideration are a 10% stock dividend and, alternatively, a 5-for-4 stock split. At the present time, the firm's equity account and other per-share information are given as follows (SEE ATTACHED TABLE) a. Show the effect on the equity accounts and per-share data of a 10% stock dividend. b. Show the effect on the equity accounts and per-share data of a 5-for-4 stock split. c. Which option will accomplish Wicker's goal of reducing the current stock price while maintaining a stable level of retained earnings? d. What legal constraints might encourage the firm to choose a stock split over a stock dividend? SCREENSHOTS PROVIDED FOR YOUR REFERENCELabrador technologies Inc. plans to become public soon. The current owners would like to know the value of each share of common equity so they price their shares correctly for potential investors. The WACC for this firm is 10.46% and there are 63,314 common shares outstanding. The firm has outstanding debt with a market value of $2,840,088 and has no preferred equity. Use the DCF valuation model based on the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 2.8% rate after Year 5. Rounding to the nearest penny, what is the value of each share of common stock? Period Free Cash Flow Year 1 $1,004,648 Year 2 $1,442,144 Year 3 $1,311,927 Year 4 $2,319,814 Year 5 $2,598,958