Sunnyfax Publishing pays out all its earnings and has a share price of $37.00. In order to expand, Sunnyfax Publishing decides to cut its dividend from $3.00 to $2.00 per share and reinvest the retained funds. Once the funds are reinvested, they are expected to grow at a rate of 14%. If the reinvestment does not affect Sunnyfax's equity cost of capital, what is the expected share price as a consequence of this decision? O $45.87 O$40.14 $68.81 $57.34
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- LL corporation has $500M of excess cash. The firm has no debt and 1K shares outstanding with a current market price of $20 per share. LL’s board has decided to pay out this cash as a one time dividend. If the board instead decided to use the cash to do a one time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete?Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $2 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock price should be $ (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If yqu plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest…LL corporation has $500M of excess cash. The firm has no debt and 1K shares outstanding with a current market price of $20 per share. LL’s board has decided to pay out this cash as a one time dividend. What is the ex-dividend price of a share in a perfect capital market?
- Blue Corp. is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would be spent. Current earnings are $1.11 per share and the stock currently sells for $42 per share. There are 2,500 shares outstanding. Ignore taxes and other imperfections. If Blue Corp. pays a dividend, what will be the dividend per share? After the dividend is paid, how many shares will be outstanding and what will the price per share be? Enter your answers rounded to 2 DECIMAL PLACES. NOTE: Fractional shares are possible (Ex. 0.49 shares) Dividend 2.2 ☑ Correct response: 2.2±0.01 Shares outstanding = 2500 Correct response: 2,500 Stock price = 39.8 Correct response: 39.8±0.01 Click "Verify" to proceed to the next part of the question. After the $2.2 dividend, the price falls to $39.8 per share. What are earnings per share (EPS) and the price earnings (P/E) ratio? Enter your answers rounded to 2 DECIMAL PLACES. EPS = Number P/E RatioNumber Click "Verify" to proceed to the next part of the…Covan, Inc. is expected to have the following free cash flow: a. Covanhas 6million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10% what should be its stock price? Covanreinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covanat the beginning of year 2, what is its expected price? c. Assume you bought Covanstock at the beginning of year 1. What is your expected return from holding Covanstock until year 2? a. Covan has 6 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 10%, what should be its stock price? The current stock price should be $ 23.47. (Round to the nearest cent.) Covan reinvests all its FCF and has no plans to add debt or change its cash holdings. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest…Newdex has net income of $3,000,000 (Including the effect of expected out-of-pocket costs) and 1,000,000 shares outstanding. It needs to raise $5,000,000 in funds for a new asset. It's investment banker plans to sell an issue of common stock to the public for $40, less spread of 10%. How much must Newdex's after-tax income increase by to prevent dilution of earnings per share?
- Bindex has net income of $2,500,000 and 1,000,000 shares outstanding. Its common stock is currently selling for $40 per share. It needs to raise $3,610,000 in funds for a new asset. Its investment dealer plans to sell an issue of common stock to the public for $38 with a spread of 5% on offer price. How much must Bindex's after-tax income increase to prevent dilution of EPS?Natsam Corporation has $291 million of excess cash. The firm has no debt and 526 million shares outstanding with a current market price of $16 per share. Natsam's board has decided to pay out this cash as a one-time divide a. What is the ex-dividend price of a share in a perfect capital market? b. If the board instead decided to use the cash do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? c. In a perfect capital market, which policy in part (a) or (b) makes investors in the firm better off? C a. What is the ex-dividend price of a share in a perfect capital market? The ex-dividend price is $ on a per share basis. (Round to the nearest cent.) b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? The price of the shares once the repurchase is complete is $ per share. (Round to the nearest…Natsam Corporation has $250 million of excess cash. The firm has no debt and 600 million shares outstanding with a current market price of $17 per share. Natsam's board has decided to pay out this cash as a one-time dividend. What is the ex-dividend price of a share in a perfect capital market? (Round to the nearestcent.) If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete? (Round to the nearestcent.) In a perfect capital market, which policy, in part (a) or (b), makes investors in the firm better off? (Round to the nearestcent.)
- Kohwe Corporation plans to issue equity to raise $50 million to finance a new investment. After making the investment, Kohwe expects to earn free cash flows of $10 million each year. Kohwe currently has 5 million shares outstanding, and has no other assets or opportunities. Suppose the appropriate discount rate for Kohwe's future free cash flows is 8%, and the only capital market imperfections are corporate taxes and financial distress costs. a. What is the NPV of Kohwe's investment? b. What is Kohwe's share price today? Suppose Kohwe borrows the $50 million instead. The finn will pay interest only on this loan each year, and maintain an outstanding balance of $40 million on the loan. Suppose that Kohwe's corporate tax rate is 35%, and expected free cash flows are still $9 million each year. c. What is Kohwe's share price today if the investment is financed with debt? Now suppose that with leverage, Kohwe's expected free cash flows wiH decline to $8 million per year due…Covan, Inc. is expected to have the following free cash flow: a. Covan has 7 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 12%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 7 million shares outstanding, $4 million in excess cash, and it has no debt. If its cost of capital is 12%, what should be its stock price? The stock price should be $ (Round to the nearest cent.) b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cent.) c. Assume you bought Covan stock at the beginning of…Covan, Inc. is expected to have the following free cash flow: a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? c. Assume you bought Covan stock at the beginning of year 1. What is your expected return from holding Covan stock until year 2? a. Covan has 8 million shares outstanding, $3 million in excess cash, and it has no debt. If its cost of capital is 11%, what should be its stock price? The stock price should be $ (Round to the nearest cent.) A b. Covan adds its FCF to cash, and has no plans to add debt. If you plan to sell Covan at the beginning of year 2, what is its expected price? If you plan to sell Covan at the beginning of year 2, its price should be $ (Round to the nearest cont.) c. Assume you bought Covan stock at the beginning of…