Question 7: The balance sheet for Quinn Corp., is shown here in market value terms. There are 12,000shares of stock outstanding. The company has declared a dividend of $1.45 per share. The stock goesex dividend tomorrow. Ignoring any tax effects, what is the stock selling for today? What will it sell fortomorrow? What will the balance sheet look like after the dividends are paid?Market Value Balance Sheet$ 49,300355,000 Equity $404,300CashFixed assetsTotal$404,300Total $404,300

Step 1: Answer and Explanation are already written in the answer box and the explanation is located…

Answered: Question 7: The balance sheet for Quinn…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 2P

See similar textbooks

Similar questions

CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?
Ratio Analysis MJO Inc. has the following stockholders equity section of the balance sheet: On the balance sheet date, MJOs stock was selling for S25 per share. Required: Assuming MJOs dividend yield is 1%, what are the dividends per common share? Assuming MJOs dividend yield is 1% and its dividend payout is 20%, what is MJOs net income?
Conroy Consulting Corporation (CCC) has a current dividend of D0 = $2.5. Shareholders require a 12% rate of return. Although the dividend has been growing at a rate of 30% per year in recent years, this growth rate is expected to last only for another 2 years (g0,1 = g1,2 = 30%). After Year 2, the growth rate will stabilize at gL = 7%. What is CCC’s stock worth today? What is the expected stock price at Year 1? What is the Year 1 expected (1) dividend yield, (2) capital gains yield, and (3) total return? What is its expected dividend yield for the second year? The expected capital gains yield? The expected total return?
7. Answer both questions: a) The stock of Payout Inc. will go ex-dividend tomorrow. The dividend will be $1 per share. There are 20,000 shares of stock outstanding. The market value balance sheet for Payout is below: Assets Liabilities and equity Cash $100,000 Equity $1,000,000 Fixed assets $900,000 i) What price is Payout selling for today? Explain your answer. ii) What price will it sell for tomorrow? Explain your answer. b) Now suppose that Payout announces its intention to repurchase $20,000 worth of stock instead of paying out the dividend. i) What effect will the repurchase have on an investor who currently holds 10 shares and sells 2 of those shares back to the company in the repurchase? ii) Compare the effects of the repurchase to the effects of the cash dividend that worked out in 7(a).
The balance sheet for Tempest, Inc., Is shown here in market value terms. There are 27,000 shares of stock outstanding. Market Value Balance Sheet Cash $ 117,000 489,960 Equity Fixed assets $606,960 Total $606,960 Total $606,960 The company has declared a dividend of $1.40 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. a. What is the stock selling for today? (Do not round intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.) b. What will it sell for tomorrow? (Do not round Intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.) a. Stock price today b. Stock price tomorrow c. What will the balance sheet look like after the dividends are pald? (Do not round Intermedlate calculations and round your answers to the nearest whole number, e.g., 32.) Cash Fixed assets Equity Total Total
The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $0.85 per share, and there are 31,000 shares of stock outstanding. The market-value balance sheet for Payout is shown below. Ignore taxes. Assets Liabilities and Equity Cash $220,000 Equity $1,240,000 Fixed assets 1,020,000 a. What price is Payout stock selling for today? (Round your answer to 2 decimal places.) b. What price will it sell for tomorrow? (Round your answer to 2 decimal places.)

Recommended textbooks for you

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

PFIN (with PFIN Online, 1 term (6 months) Printed…

Finance

ISBN:

9781337117005

Author:

Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:

Cengage Learning

Personal Finance

Finance

ISBN:

9781337669214

Author:

GARMAN

Publisher:

Cengage

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

PFIN (with PFIN Online, 1 term (6 months) Printed…

Finance

ISBN:

9781337117005

Author:

Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:

Cengage Learning

Personal Finance

Finance

ISBN:

9781337669214

Author:

GARMAN

Publisher:

Cengage

Pfin (with Mindtap, 1 Term Printed Access Card) (…

Finance

ISBN:

9780357033609

Author:

Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Fundamentals of Financial Management, Concise Edi…

Finance

ISBN:

9781285065137

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS