Hors d'Age Cheeseworks has been paying a regular cash dividend of $8.5 per share each year for more than a decade. The company is paying out all its earnings as dividends and is not expected to grow. There are 91,000 shares outstanding selling for $89 per share. The company has sufficient cash on hand to pay the next annual dividend. Suppose that, starting in year 1, Hors d'Age decides to cut its cash dividend to zero and announces that it will repurchase shares instead. a. Is there any immediate stock price reaction? Ignore taxes, and assume that the repurchase program conveys no information about operating profitability or business risk. b. How many shares will Hors d'Age purchase? Note: Enter your answer as a whole number. c. Project future stock prices for both the old and new policies for years 1, 2, and 3. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. a. Is there any immediate stock price reaction? b. Number of shares c. Price year 1 c. Price year 2 No

Hors d'Age Cheeseworks has been paying a regular cash dividend of $8.5 per share each year for more than a decade. The company is paying out all its earnings as dividends and is not expected to grow. There are 91,000 shares outstanding selling for $89 per share. The company has sufficient cash on hand to pay the next annual dividend. Suppose that, starting in year 1, Hors d'Age decides to cut its cash dividend to zero and announces that it will repurchase shares instead. a. Is there any immediate stock price reaction? Ignore taxes, and assume that the repurchase program conveys no information about operating profitability or business risk. b. How many shares will Hors d'Age purchase? Note: Enter your answer as a whole number. c. Project future stock prices for both the old and new policies for years 1, 2, and 3. Note: Do not round intermediate calculations. Round your final answer to 2 decimal places. a. Is there any immediate stock price reaction? b. Number of shares c. Price year 1 c. Price year 2 No

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Description: Qd 40. Hors d'Age Cheeseworks has been paying a regular cash dividend of $8.5 per share each year for more than a decade. Thecompany is paying out all its earnings as dividends and is not expected to grow. There are 91,000 shares outstanding selling

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

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