tock Dividends [LO3] The market value balance sheet for Vena Sera Manufacturing is shown here. Vena Sera has declared a 25 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend). There are 12,000 shares of stock outstanding. What will the ex-dividend price be? Market Value Balance Sheet Cash Fixed assets Total $ 38,500 270,000 $308,500 Equity Total $308,500 $308,500 Market Value Balance Sheet Cash Fixed assets Total $ 93,000 509,000 $602,000 Debt Equity Total $131,000 471,000 $602,000
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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tock Dividends [LO3] The market value balance sheet for Vena Sera Manufacturing is shown here. Vena Sera has declared a 25 percent stock dividend. The stock goes ex dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend). There are 12,000 shares of stock outstanding. What will the ex-dividend price be?
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Market Value Balance Sheet |
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Cash Total |
$ 38,500 270,000 $308,500 |
Equity Total |
$308,500 $308,500 |
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Market Value Balance Sheet |
|||
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Cash Total |
$ 93,000 509,000 $602,000 |
Debt Equity Total |
$131,000 471,000 $602,000 |
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