Jumanji Corp. an all equity firm has stock price currently at $75 and has 4 million share outstanding. They invested $50 million in T-bills that earn 8% annually; the after-tax interest payments on the T- bills are paid to shareholders as a divident. Their tax rate is 30% and shreholders do not pay tax on any earnings. They announce that T - bills are to be sold and the proceeds are to be paid out as a special divident of $12.50 per share. What will be the price of the company's stock after the announcement of the special dividend?
Jumanji Corp. an all equity firm has stock price currently at $75 and has 4 million share outstanding. They invested $50 million in T-bills that earn 8% annually; the after-tax interest payments on the T- bills are paid to shareholders as a divident. Their tax rate is 30% and shreholders do not pay tax on any earnings. They announce that T - bills are to be sold and the proceeds are to be paid out as a special divident of $12.50 per share. What will be the price of the company's stock after the announcement of the special dividend?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Jumanji Corp. an all equity firm has stock price
currently at $75 and has 4 million share outstanding.
They invested $50 million in T-bills that earn 8%
annually; the after-tax interest payments on the T-
bills are paid to shareholders as a divident. Their tax
rate is 30% and shreholders do not pay tax on any
earnings. They announce that T - bills are to be sold
and the proceeds are to be paid out as a special
divident of $12.50 per share. What will be the price of
the company's stock after the announcement of the
special dividend?
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