QUESTION 3 The Ship-Quick Logistics Company is trying to decide whether to cut its expected dividends for next year from $10 per share to $6 per share in order to have more money to invest in new projects. If it does not cut the dividend, the firm's expected rate of growth in dividends is 4 percent per year and the price of their common stock will be $150 per share. However, if it cuts its dividend, the dividend growth rate is expected to rise to 5 percent in the future. Assuming that the investor's required rate of return for the stock does not change, what would you expect to happen to the price of its common stock if it cuts the dividend to $6? Should Ship-Quick cut its dividend? O $99.99; Should not cut its dividend O $105.82; Should not cut its dividend. O $110.55; Should cut its dividend. O $155.32; Should cut its dividend. O $175.65; Should not cut its dividend.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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QUESTION 3
The Ship-Quick Logistics Company is trying to decide whether to cut its expected dividends for next year from $10 per share to $6 per share in
order to have more money to invest in new projects. If it does not cut the dividend, the firm's expected rate of growth in dividends is 4 percent per
year and the price of their common stock will be $150 per share. However, if it cuts its dividend, the dividend growth rate is expected to rise to 5
percent in the future. Assuming that the investor's required rate of return for the stock does not change, what would you expect to happen to the
price of its common stock if it cuts the dividend to $6? Should Ship-Quick cut its dividend?
O $99.99 ; Should not cut its dividend
O $105.82; Should not cut its dividend.
O $110.55; Should cut its dividend.
O $155.32; Should cut its dividend.
O $175.65; Should not cut its dividend.
QUESTION 4
Bonds issued by American Aero Inc. bear an 8% coupon, payable semiannually. The bonds mature in 10 years and have a $1,000 face value.
Currently the bonds sell for $675. What is the yield to maturity?
O 7.09%
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Transcribed Image Text:Question Completion Status: QUESTION 3 The Ship-Quick Logistics Company is trying to decide whether to cut its expected dividends for next year from $10 per share to $6 per share in order to have more money to invest in new projects. If it does not cut the dividend, the firm's expected rate of growth in dividends is 4 percent per year and the price of their common stock will be $150 per share. However, if it cuts its dividend, the dividend growth rate is expected to rise to 5 percent in the future. Assuming that the investor's required rate of return for the stock does not change, what would you expect to happen to the price of its common stock if it cuts the dividend to $6? Should Ship-Quick cut its dividend? O $99.99 ; Should not cut its dividend O $105.82; Should not cut its dividend. O $110.55; Should cut its dividend. O $155.32; Should cut its dividend. O $175.65; Should not cut its dividend. QUESTION 4 Bonds issued by American Aero Inc. bear an 8% coupon, payable semiannually. The bonds mature in 10 years and have a $1,000 face value. Currently the bonds sell for $675. What is the yield to maturity? O 7.09% Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All
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