Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. The Quick Buck Company is an all-equity firm that has been in existence for the past three years. Company management expects thatthe company will last for two more years and then be dissolved. The firm will generate cash flows of $780,000 next year and$1,220,000 in two years, including the proceeds from the liquidation. There are 34,000 shares of stock outstanding and shareholdersrequire a return of 11 percent.a. What is the current price per share of the stock?Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.b. The board of directors is dissatisfied with the current dividend policy and proposes that a dividend of $870,000 be paid nextyear. To raise the cash necessary for the increased dividend, the company will sell new shares of stock. How many shares ofstock must be sold? What is the new price per share of the existing shares of stock?Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.a. Share priceb. Shares sold

Stock valuation is the process of determining the fair value of a company's stock or shares. This…

Answered: The Quick Buck Company is an all-equity…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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The Quick Buck Company is an all-equity firm that has been in existence for the past three years. Company management expects that the company will last for two more years and then be dissolved. The firm will generate cash flows of $860,000 next year and $1,340,000 in two years, including the proceeds from the liquidation. There are 38,000 shares of stock outstanding and shareholders require a return of 11 percent. a. What is the current price per share of the stock? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. The board of directors is dissatisfied with the current dividend policy and proposes that a dividend of $960,000 be paid next year. To raise the cash necessary for the increased dividend, the company will sell new shares of stock. How many shares of stock must be sold? What is the new price per share of the existing shares of stock? Note: Do not round intermediate calculations and round your answers to 2 decimal places,…
Wichita Realty Trust is expected to pay a modest dividend of $1.00/share for two years and then $2.00/share for years three through five. Then in year six, the trust is planning to pay a $40.00-per-share liquidating dividend and go out of business. What is the value of a share of this firm if the required return is 10%?
Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.7 million shares that are outstanding. Shareholders required a 10 % rate of return on consolidated stock. A. What is the price of Consolidated stock? B. What is the total market value of its equity? Consolidated now decides to increase next year’s dividends to $20 a share, without changing its investment or borrowing plans. Thereafter, the company will revert to its policy of distributing $10 per year. C. How much new equity capital will the company need to raise to finance the extra dividend payment (enter answer in millions). D. What will be the total present value of dividends paid each year on the new shares that the company will need to issue (answer in millions)? E. what will be the transfer of value from old shareholder to new shareholder (answer in million)?
A company has net earnings of AED 10,000 for the current vear and suppose the company maintai the same earnings for the next year. The company has 1,000 total outstanding shares during the current year. The company decides to buyback 40% of its shares in the following year. Show how this decision will impact the company's earnings per share?
Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.53 per share and paid cash dividends of $1.83 per share (D Subscript 0=$1.83). Grips' earnings and dividends are expected to grow at 40% per year for the next 3 years, after which they are expected to grow 9%per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 11% on investments with risk characteristics similar to those of Grips? The maximum price per share that Newman should pay for Grips is
Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $4.25 per share and paid cash dividends of $2.55 per share. Grips’ earnings and dividends are expected to grow at 25% per year for the next 4 years, after which they are expected to grow at 10% per year for the next 2 years, and afterward grow at 5% to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 15% on investments with risk characteristics similar to those of Grips?
Xijiang issued 1000 shares at the beginning of fiscal year (t=0), and the net profit at the end of fiscal year (t=1) is expected to be 2million won. (zhuxijiang plans to pay a total of 800000 won as dividends to shareholders at the end of the accounting year, and the rest will be retained for internal reinvestment. (Zhou) the average self capital profit margin (roe= current net profit of the accounting year / self capital at the beginning of the accounting year) of Xijiang in each accounting year will be maintained at 20%. (shares) Xijiang's dividend policy and self capital profit margin will continue to be maintained. The annual required rate of return (RRR) of the enterprise in the market is 16%. If the dividend growth rate (or profit growth rate) of the company is equal to the return on self capital (ROE) multiplied by the internal retention rate, please answer the following questions. The dividend discount model is used to calculate the stock price at the beginning of the…
Asonia Co. will pay a dividend of $4.30, $8.40, $11.25, and $13.40 per share for each of the next four years, respectively. The company will then close its doors. If investors require a return of 9.9 percent on the company's stock, what is the stock price? $30.81 $33.17 $34.82 $28.53 $40.07
House of Haddock has 5,060 shares outstanding and the stock price is $146. The company is expected to pay a dividend of $26 per share next year and thereafter the dividend is expected to grow indefinitely by 3% a year. The president, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. The repurchased stock will not be entitled to the dividend. a-1. What is the total value of the company before the announcement? a-2. What is the total value of the company after the announcement? a-3. What is the value of one share? b. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? Check your estimate of share value by discounting this stream of dividends per share. Complete this question by entering your answers in the tabs below. Req A1 to A3 Req B a-1. What is the total…
Net profit of Green Forest Ltd in the current year is $2,355,000. The company is planning to launch a project that will requires an investment of $ 945,000 next year. The common stock of the company goes ex-dividend tomorrow. The stock closed at a price of $35.65 per share today. The company is paying a cash dividend of $4.50 a share and an extra cash dividend of $1.5 a share. Required: Calculate the net profit available for dividend payment and dividend payout ratio of the company, assuming the capital structure of the company is 60% equity funding, 40% debt funding, using the Residual Dividend Payout Policy. Assuming the tax rate on dividends is 25%. Calculate the ex-dividend price tomorrow morning
The Link Resport & Spa Company has 75,000 shares of stock outstanding. The company is expected to have total earnings next year of $500,000. The company plans to reinvest $275,000 in projects earning an (equity) return of 15%, and to return the remainder of its earnings to shareholders in the form of dividends or stock repurchases. The first dividend or repurchse payments will be made exactly one year from today. In all future years, the market expects the company's reinvestment rate and the return on reinvested earnings to remain constant. The required return on equity is 12%. What is the value of the firm today, if it 1.) uses the remaining $225,000 to pay dividends, and will continue this payout policy (as a percent of earnings) in future years? 2) uses 40% of its annual payout to repurchase stock, and uses the remainder to pay divdends (and will continue this policy in future years)? Assume that the firm will use the remaining $225,000 to pay dividends (and will continue this…
House of Haddock has 5,050 shares outstanding and the stock price is $145. The company is expected to pay a dividend of $25 per share next year and thereafter the dividend is expected to grow indefinitely by 2% a year. The President, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. The repurchased stock will not be entitled to the dividend. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? Check your estimate of share value by discounting this stream of dividends per share. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Year Expected Dividend 1 $ 2 $

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