Principles of Corporate Finance
13th Edition
ISBN: 9781260465099
Author: BREALEY, Richard
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 16, Problem 15PS
a)
Summary Introduction
To determine: The stock price of company H after the planned dividend pay-out.
b)
Summary Introduction
To determine: The impact on stock price due to repurchase announcement and the number of shares company need to repurchase.
The share repurchase is the strategy by which companies will take back or buy back its own shares from the market place. If the management considered the shares are undervalued the company may buy back its shares.
c)
Summary Introduction
To discuss: The impact of with- and ex-dividend share prices and the number of shares to be repurchased.
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Assume capital markets are perfect. Kabo Industries currently has $12 million invested in shortterm Treasury securities paying 8%, and it pays out the interest payments on these securitieseach year as a dividend. The board is considering selling the Treasury securities and paying outthe proceeds as a one-time dividend payment.i. If the board went ahead with this plan, what would happen to the value of Kabo stock uponthe announcement of a change in policy?ii. What would happen to the value of Kabo stock on the ex-dividend date of the one-timedividend?iii. Given these price reactions, will this decision benefit investors?
Dana Corporation does not pay a common dividend. Your job is to use the Cash Flow From Assets (CFFA) model to estimate the firm’s intrinsic stock price for December 31, 2023. You are given the following data for that purpose (note that all figures other than WACC are in Millions):
What is the Value of Dana Corp.’s Operations, the expected growth rate in Free Cash Flows, and total value of the firm?
Dana Corp. Financial Data ($Millions)
Year 0
2020
2021
2022
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Free Cash Flow (FCF)
$ 16.000
$ 16.800
$ 17.640
$ 18.522
Weighted-Average Cost of Capital (WACC)
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$ 32.66
Non-Operating LT Assets
$ 184.00
Short-term debt
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Long-term debt
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Preferred Equity
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15
Chapter 16 Solutions
Principles of Corporate Finance
Ch. 16 - Dividend payments In 2017, Entergy paid a regular...Ch. 16 - Dividend payments Seashore Salt Co. has surplus...Ch. 16 - Repurchases Look again at Problem 2. Assume...Ch. 16 - Repurchases An article on stock repurchase in the...Ch. 16 - Company dividend policy Here are several facts...Ch. 16 - Prob. 7PSCh. 16 - Information content of dividends What is meant by...Ch. 16 - Information content of dividends Does the good...Ch. 16 - Information content of dividends Generous dividend...Ch. 16 - Prob. 11PS
Ch. 16 - Payout policy in perfect capital markets Go back...Ch. 16 - Payout policy in perfect capital markets Go back...Ch. 16 - Payout policy in perfect capital markets Respond...Ch. 16 - Prob. 15PSCh. 16 - Repurchases and the DCF model Hors dAge...Ch. 16 - Repurchases and the DCF model Surf Turf Hotels is...Ch. 16 - Repurchases and the DCF model House of Haddock has...Ch. 16 - Repurchases and the DCF model Little Oil has 1...Ch. 16 - Repurchases and EPS Many companies use stock...Ch. 16 - Dividends and value We stated in Section 16-3 that...Ch. 16 - Payout and valuation Look back one last time at...Ch. 16 - Dividend clienteles Mr. Milquetoast admires Warren...Ch. 16 - Prob. 24PSCh. 16 - Payout and taxes Which of the following U.S....Ch. 16 - Prob. 26PSCh. 16 - Prob. 27PSCh. 16 - Prob. 28PSCh. 16 - Dividend policy and the dividend discount model...Ch. 16 - Prob. 30PS
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