please help me analyze and asnwer the questions with formula so that i can learn and get ready for my exam :< Common stock value-Zero growth Personal Finance Problem Kelsey Drums, Inc., is a well-established supplier of fine percussion instruments to orchestras all over the United States. The company's class A common stockhas paid a dividend of $3.82 per share per year for the last 16 years. Management expects to continue to pay at that amount for the foreseeable future. Kim Arnold purchased 100 shares of Kelsey class A common 10 years agoat a time when the required rate of return for the stock was 9.7%. She wants to sell her shares today. The current required rate of return for the stock is 14.70%. How much total capital gain or loss will Kim have on her shares?The value of the stock when Kim purchased it was $ per share. (Round to the nearest cent.)The value of the stock if Kim sells her shares today is $ per share. (Round to the nearest cent.)The total capital gain (or loss) Kim will have on her shares is $ |. (Round to the nearest dollar. Enter a positive number for a capital gain and a negative number for a loss.)

In the context of the given question, we compute the required figures by using the Dividend price…

Answered: Sup has paid a dividend of $3.82 per…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter11: Stockholders' Equity

Section: Chapter Questions

Problem 11.2P

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Value of Equity after Recapitalization Nichols Corporations value of operations is equal to 500 million after a recapitalization (the firm had no debt before the recap). It raised 200 million in new debt and used this to buy back stock. Nichols had no short-term investments before or after the recap. After the recap, Wd = 40%. What is S (the value of equity after the recap)?
Stock Price after Recapitalization Lee Manufacturings value of operations is equal to 900 million after a recapitalization. (The firm had no debt before the recap.) Lee raised 300 million in new debt and used this to buy back stock. Lee had no short-term investments before or after the recap. After the recap, wd = 1/3. The firm had 30 million shares before the recap. What is P (the stock price after the recap)?
Value of Operations Kendra Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is expected to grow at a constant rate of 8%. The company’s weighted average cost of capital is 12%. What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.) Calculate the value of Kendra’s operations.
ALTERNATIVE DIVIDEND POLICIES Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of 0.75 out of annual earnings per share of 2.25. Currently, Rubenstein Bros.' stock is selling for 12.50 per share. Adhering to the company's target capital structure, the firm has 10 million in total invested capital, of which 40% is funded by debt. Assume that the firm's book value of equity equals its market value. In past years, the firm has earned a return on equity (ROE) of 18%, which is expected to continue this year and into the foreseeable future. a. Based on this information, what long-run growth rate can the firm be expected to maintain? (Hint: g = Retention rate ROE.) b. What is the stock's required return? c. If the firm changed its dividend policy and paid an annual dividend of 1.50 per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE. Therefore, what must be the firms new expected long-run growth rate and required return? d. Suppose instead that the firm has decided to proceed with its original plan of dis bursing 0.75 per share to shareholders, but the firm intends to do so in the form of a stock dividend rather than a cash dividend. The firm will allot new shares based on the current stock price of 12.50. In other words, for every 12.50 in dividends due to shareholders, a share of stock will be issued. How large will the stock dividend be relative to the firm's current market capitalist ion? (Hint. Remember that market capitalization = P0 number of shares outstanding.) e. If the plan in part d is implemented, how many new shares of stock will be issued, and by how much will the companys earnings per share be diluted?
Payout Policy. House of Haddock has 5,000 shares outstanding and the stock price is $100. The company is expected to pay a dividend of $20 per share next year, and thereafter, the dividend is expected to grow indefinitely by 5% a year. The president, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. a. what should be the total value of the company before the announcement? b. what should be the total value after the announcement? c. what must be the expected rate of return on equity? d. what is the new growth rate in the dividend stream? (check your estimate of share value by discounting this stream of dividends per share)
VR-X issued 100,000 common stocks at par value of $12 to expand its business 3 years ago specialized in interior design services. The company has just paid a dividend of $2 per share and predicts for dividend cuts because of the coronavirus pandemic. The dividends are expected to decrease at an annual rate of 20 percent for the next two years. Afterwards, the company is confident that the dividend will be in rebound and stabilize at a constant growth rate of 8 percent in the foreseeable future. VR-X’s common stock has a beta of 1.25. The risk-free rate is 4 percent and the market risk premium is 7 percent. (a) Calculate the required return on VR-X common stock based on capital pricing model. (CAPM) (b) Calculate the dividend amounts in 1, 2 and 3 years respectively (D1, D2 and D3). (c) Based on parts (a) and (b), calculate the current common stock price. (please show me steps and round the final answer to 2 decimal places, thanks)
****PLEASE ANSWER PART D AND E ONLY. thanks 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 shareholder (answer in million)?
A. Judy's Boutique just paid an annual dividend of $3.61 on its common stock. The firm increases its dividend by 3.50 percent annually. What is the company's cost of equity if the current stock price is $43.48 per share? A.12.09% B.11.47% C.11.15% D.12.52% B.Countess Corporation is expected to pay an annual dividend of $4.45 on its common stock in one year. The current stock price is $72.55 per share. The company announced that it will increase its dividend by 3.60 percent annually. What is the company's cost of equity? A.9.19% B.10.32% C.9.46% D.9.73% C.The stock in Bowie Enterprises has a beta of 1.24. The expected return on the market is 11.20 percent and the risk-free rate is 2.82 percent. What is the required return on the company's stock? A.14.96% B.13.21% C.12.84% D.16.71%
Internal common equity when the current market price of the common stock is 49. The dividend paid in the last year should be 3.0 Increasing thereafter at an annual growth rate of 11%. The corporation's tax rate is 24 percent. What is the cost of internal common equity? A preferred stock paying a dividend of 8% on a $100 par value. If a new issue is offered, costs will be 15 percent of the current price of $150. What is the cost of capital for the preferred stock? Crawford Enterprise is a publicly held company financed by 35bonds and 65\% common stocks. The market requires a 19% return on its common stocks. The firm's bonds command a yield to maturity of 9%, and the f1rm^ 4 s marginal tax rate is 30%What is the weighted average cost of capital (WACC)?
[EXCEL] Cost of common stock: Two-Stage Rocket paid an annual dividend of $1.25 yesterday, and it is commonly known that the firm's management expects to increase its dividend by 8 percent for the next two years and by 2 percent thereafter. If the current price of Two-Stage's common stock is $17.80, what is the cost of common equity capital for the firm? please use excel
Muji earned $10 million for the fiscal year. The firm also paid out 25 percent of its earning as dividend. This policy remains in foreseeable future. The remaining 75 percent of earnings is retained for further investment. The company has 1.25 million shares of common stock outstanding. The current stock price is $40.00. Based on its recent financial statement, its return on equity is 11 percent and is expected to continue in the future. Compute the required rate of return on the stock. **D1= 2(1+g) or D1 = 2? Why?
"Finance3000" is a young start-up company. It will not pay any dividends on its stock over the next nine years because it plans to use retained earnings on expanding its business. "Finance3000" will pay a $11 per share dividend 10 years from today. After that the company will increase the dividend by 4 percent per year, in perpetuity. The required return on this stock is 12 percent. Calculate the value of one share of "Finance3000"'s stock. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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