3. JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, what will the value of a share of JRN be after the announcement?

3. JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, what will the value of a share of JRN be after the announcement?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 22P

See similar textbooks

Similar questions

JRN Enterprises just announced that it plans to cut its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $25.00 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to:
JRN Enterprises just announced that it plans to cut its next-year dividend, D₁, from $2.25 to $1.30 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 5% per year and JRN's stock was trading at $25.50 per share. With the new expansion, JRN's dividends are expected to grow at 10% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to: OA. $14.73 OB. $58.84 C. $34.00 D. $25.50
Canadian Tire just announced that it plans to reduce its dividend from $2.50 to $1.50 per share and use the extra funds to expand its operations. Prior to this announcement, Canadian Tire.s dividends were expected to grow at 4% per year and Canadian Tire.s stock was trading at $25.00 per share. With the new expansion, Canadian Tire.s dividends are expected to grow at 8% per year inde.nitely. Assuming that Canadian Tire.s risk is unchanged by the expansion, the value of a share of Canadian Tire after the announcement is approximately: A) $25.00 B) $15.00 C) $31.25 D) $27.50 E) $29.75
JRN Enterprises just announced that it plans to cut its next-year dividend,D1, from $2.25 to $1.20 per share and use the extra funds to expand its operations. Prior to this announcement, JRN's dividends were expected to grow at 4% per year and JRN's stock was trading at $24.50 per share. With the new expansion, JRN's dividends are expected to grow at 8% per year indefinitely. Assuming that JRN's risk is unchanged by the expansion, the value of a share of JRN after the announcement is closest to?
Dreamline expects to earn $20 per share this year and intends to pay out $8 in dividends to shareholders. It is planning to invest in new projects with an expected return on equity of 20%. The future plans of Dreamline involve retaining the same dividend payout ratio. Dreamline expects to earn 20% on its equity .The number of common shares outstanding will remain unchanged. i) Calculate the future growth rate for Dreamline’s earnings. ii) If the required rate of return of for Dreamline’s common stock is 15%, what would be the price of Dreamline’s common stock? iii) Compare the valuation of bonds and preferred stock with that of common stock
Cooperton Mining just announced it will cut its dividend from $3.88 to $2.59 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends wereCX Enterprises has the following expected dividends: $1.03in one year, $1.18 in two years, and $1.25 in three years. After that, its dividends are expected to grow at 4.4% per yearZoom Enterprises expects that one year from now it will pay a total dividend of $5.0 million and repurchase $5.0 millionworth of shares. It plans to spend $10.0 million on dividendsZoom Enterprises expects that one year from now it will pay a total dividend of S5.0 million and repurchase $5.0 million worth of shares. It plans to spend $10.0 million ondividends and repurchases every year after that forever, although it may not always be an even split between dividends and repurchases. If Zoom's equity cost of capital is 13.0% and it has 5.0 million shares outstanding, what is its shareprice today? The price per share is S. (Round to the…
The Merriweather Co. just announced that it will pay a dividend next year of $1.60. The company will then increase its dividend by 10 percent per year for two years after which it will maintain a constant 2 percent dividend growth rate. What is one share worth today at a required rate of return of 14 percent?
Company Z's earnings and dividends per share are expected to grow indefinitely by 2% a year. Assume next year's dividend per share is $20 and next year's EPS is $5. The market capitalization rate is 10%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $5 a share. How much is the market actually paying per share for growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Company Z's earnings and dividends per share are expected to grow indefinitely by 4% a year. Assume next year's dividend per share is $17 and next year's EPS is $5. The market capitalization rate is 14%. If Company Z were to distribute all of its earnings, it could maintain a level dividend stream of $5 a share. How much is the market actually paying per share for growth opportunities? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value growth opportunities
Simpkins Corporation is expanding rapidly, and it currently needs to retain all of its earnings; hence it does not pay any dividends. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly—at a rate of 50% per year—during Years 4 and 5. After Year 5, the company should grow at a constant rate of 8% per year. If the required return on the stock is 15%, what is the value of the stock today?
The FI Corporation's dividends per share are expected to grow indefinitely by 6% per year. a. If this year's year-end dividend is $8.00 and the market capitalization rate is 10% per year, what must the current stock price be according to the DDM? Current stock price b. If the expected earnings per share are $16.00, what is the implied value of the ROE on future investment opportunities? (Round your answer to 2 decimal places.) Value of ROE c. How much is the market paying per share for growth opportunities (i.e., for an ROE on future investments that exceeds the market capitalization rate)? (Round your answer to 2 decimal places.) Amount % per share
Portman Industries just paid a dividend of $1.92 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman’s dividend is expected to grow at a constant rate of 3.20% per year. Term Value Dividends one year from now (D1D1) $2.2272 Horizon value (Pˆ1)P̂1 $22.10 Intrinsic value of Portman’s stock $21.41 The risk-free rate (rRFrRF) is 4.00%, the market risk premium (RPMRPM) is 4.80%, and Portman’s beta is 2.00. Assuming that the market is in equilibrium, What is the expected dividend yield for Portman’s stock today?