Mahomes Company has a current period cash flow of $1.5 million and pays no dividends.The present value of the company's future cash flows is $28 million. The company isentirely financed with equity and has 770,000 shares outstanding. Assume the dividendtax rate is zero.a. What is the share price of the company's stock? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g., 32.16.)Share priceb. Suppose the board of directors of the company announces its plan to pay out50 percent of its current cash flow as cash dividends to its shareholders. Jeff Miller,who owns 1,200 shares of the company's stock, wants to achieve a zero payout policyon his own, by buying or selling shares. How many shares should he sell or buy? (Donot round intermediate calculations and round your answer to 2 decimal places,e.g., 32.16.)Number of shares to

Price per share can be determined as the present value of cash flow to the equity holders.

Answered: Mahomes Company has a current period…

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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Optimized Co. has a current period cash flow of $1.1 million and pays no dividends. The present value of the company's future cash flows is $13 million. The company is entirely financed with equity and has 610,000 shares outstanding. Assume the dividend tax rate is zero. a. What is the share price of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price b. Suppose the board of directors of the company announces its plan to pay out 50 percent of its current cash flow as cash dividends to its shareholders. Jeff Miller, who owns 1,300 shares of the company's stock, wants to achieve a zero payout policy on his own, by buying or selling shares. How many shares should he sell or buy? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Number of shares to # 3 * 4 O werd % 5 a J 10 6 & 7 8 K◄◄
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XYZ Co. has 100,000 shares of stock outstanding; total current assets is P2,050,000, P455,000 of which is cash; total current liabilities is P900,000. There is no outstanding dividends payable. Assuming XYZ Co. maintains aminimum current ratio of 2 and that the above accounts will remain unchanged except cash, what is the maximum dividends per share that XYZ Co. can pay in cash? A. P2.50 B. P3.35 C. P3.80 D. P72.05 E. answer not given

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