PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Chapter 16, Problem 21PS
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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See Table 2.5
showing financial statement data and stock price data for Mydeco Corp. Suppose Mydeco repurchases 1.9 million shares each year from 2016 to 2019. What would be its earnings per share in 2019? (Assume Mydeco pays for the shares using its available cash and that Mydeco earns no interest on its cash balances.)
Dividends and share buybacks
Here are key Önancial data for the company Silverstar Inc.: Earnings per share for 2021 is $5.50, number of shares outstanding is 40 million, target dividend payout ratio is 50%, planned dividend per share is $2.75 and stock price at year-end 2021 is $150.
The company plans to pay the entire dividend early in January 2022. Ignore all corporate and personal taxes.
3. Suppose that, instead of canceling the dividend, the company increases dividends to $5.50 per share and then issues new shares to recoup the extra cash paid out as dividends. What happens to the with- and ex-dividend share prices? How many shares will need to be issued?
Dividends and share buybacks
Here are key Önancial data for the company Silverstar Inc.: Earnings per share for 2021 is $5.50, number of shares outstanding is 40 million, target dividend payout ratio is 50%, planned dividend per share is $2.75 and stock price at year-end 2021 is $150.
The company plans to pay the entire dividend early in January 2022. Ignore all corporate and personal taxes.
What will be House of Herringís stock price after the planned dividend payout?
Suppose the company cancels the dividend and announces that it will use the money saved to repurchase shares. What happens to the stock price on the announcement date? How many shares will the company need to repurchase?
Chapter 16 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 16 - Prob. 1PSCh. 16 - Company dividend policy Here are several facts...Ch. 16 - Dividend payments Seashore Salt Co. has surplus...Ch. 16 - Repurchases Look again at Problem 3. Assume...Ch. 16 - Payout policy in perfect capital markets Go back...Ch. 16 - Dividends and stock price Go back to the first...Ch. 16 - Prob. 7PSCh. 16 - Repurchases and the DCF model Surf Turf Hotels is...Ch. 16 - Prob. 9PSCh. 16 - Payout and taxes Which of the following U.S....
Ch. 16 - Prob. 11PSCh. 16 - Prob. 13PSCh. 16 - Information content of dividends What is meant by...Ch. 16 - Information content of dividends Does the good...Ch. 16 - Prob. 16PSCh. 16 - Repurchases and the DCF model Little Oil has 1...Ch. 16 - Dividends and value We stated in Section 16-3 that...Ch. 16 - Prob. 19PSCh. 16 - Repurchases and the DCF model House of Haddock has...Ch. 16 - Prob. 21PSCh. 16 - Prob. 22PSCh. 16 - Repurchases and the DCF model Hors dAge...Ch. 16 - Repurchases An article on stock repurchase in the...Ch. 16 - Prob. 25PSCh. 16 - Information content of dividends Generous dividend...Ch. 16 - Repurchases and EPS Many companies use stock...Ch. 16 - Prob. 28PSCh. 16 - Dividend policy and the dividend discount model...Ch. 16 - Prob. 30PS
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