Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 17, Problem 5QP
Regular Dividends [LO1] The
![Chapter 17, Problem 5QP, Regular Dividends [LO1] The balance sheet for Ferguson Corp. is shown here in market value terms.](http://dev-ingestion-image-output.s3-website-us-east-1.amazonaws.com/9780077861704/Chapter-17/images/61704-17-5qp-question-digital_image_001.png)
The company has declared a dividend of $1.30 per share. The stock goes ex dividend tomorrow. Ignoring any tax effects, what is the stock selling for today? What will it sell for tomorrow? What will the balance sheet look like after the dividends are paid?
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Q1. The balance sheet for Firth Group is provided below in market value terms. There are 12,000shares outstanding. The company has declared a dividend of $1.9 per share. The stock goes ex dividend tomorrow.Assume zero tax rate. Answer the following questions.
a) What is the stock price selling today?b) What is the stock price selling tomorrow?c) If the dividend tax rate is 10% and there is no capital gain tax, is the stock pricing sellingtomorrow greater, lower, or equal to the answer you got in b)? Why?
how much will you pay for the company's stock today?
5. Stock Valuation Redan, Inc., is expected to maintain a constant 4.3 percent
growth rate in its dividends, indefinitely. If the company has a dividend yield
of 5.6 percent, what is the required return on the company's stock?
6. Stock Valuation Suppose you know that a company's stock currently sells
Wish You Were Here, Inc, currently does not pay a dividend but is expected to pay its first annual dividend of $4.90 per share exactly 7 years from today. After that, the dividends will grow at 3.5 percent forever. If the required return is 11.3 percent, what is the price of the stock today?
a. $51.10
b. $62.82
c. $29.69
d. $33.05
Chapter 17 Solutions
Fundamentals of Corporate Finance
Ch. 17.1 - Prob. 17.1ACQCh. 17.1 - What are the mechanics of the cash dividend...Ch. 17.1 - How should the price of a stock change when it...Ch. 17.2 - How can an investor create a homemade dividend?Ch. 17.2 - Prob. 17.2BCQCh. 17.3 - Prob. 17.3ACQCh. 17.3 - Why do flotation costs favor a low payout?Ch. 17.4 - Why might some individual investors favor a high...Ch. 17.4 - Prob. 17.4BCQCh. 17.5 - How does the market react to unexpected dividend...
Ch. 17.5 - Prob. 17.5BCQCh. 17.6 - Prob. 17.6ACQCh. 17.6 - Prob. 17.6BCQCh. 17.8 - Prob. 17.8ACQCh. 17.8 - How does the accounting treatment of a stock split...Ch. 17 - Dividends are paid to the parties listed as...Ch. 17 - Prob. 17.3CTFCh. 17 - Prob. 17.4CTFCh. 17 - Prob. 17.8CTFCh. 17 - Dividend Policy Irrelevance [LO2] How is it...Ch. 17 - Prob. 2CRCTCh. 17 - Prob. 3CRCTCh. 17 - Prob. 4CRCTCh. 17 - Prob. 5CRCTCh. 17 - Prob. 6CRCTCh. 17 - Prob. 7CRCTCh. 17 - Prob. 8CRCTCh. 17 - Prob. 9CRCTCh. 17 - Prob. 10CRCTCh. 17 - Prob. 1QPCh. 17 - Prob. 2QPCh. 17 - Prob. 3QPCh. 17 - Prob. 4QPCh. 17 - Regular Dividends [LO1] The balance sheet for...Ch. 17 - Prob. 6QPCh. 17 - Prob. 7QPCh. 17 - Stock Dividends [LO3] The company with the common...Ch. 17 - Stock Splits [LO3] In the previous problem,...Ch. 17 - Homemade Dividends [LO2] You own 1,000 shares of...Ch. 17 - Prob. 11QPCh. 17 - Stock Repurchase [LO4] Galles Corporation is...Ch. 17 - Expected Return, Dividends, and Taxes [LO2] The...Ch. 17 - Dividends and Taxes [LO2] As discussed in the...Ch. 17 - Prob. 15QPCh. 17 - Dividends versus Reinvestment [LO2] After...Ch. 17 - Prob. 1MCh. 17 - Prob. 2MCh. 17 - Prob. 3MCh. 17 - Prob. 4MCh. 17 - Prob. 5MCh. 17 - Prob. 6M
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Suppose Lilly V, Inc. has just paid a dividend. The next dividend, to be paid in a year, is forecasted to be $4. If the growth rate of dividends is 7% and the discount rate is 11%, at what price will the stock sell? a.Less than $100 b.More than $100 c.$100 d.$111arrow_forwardQuestion 7: The balance sheet for Quinn Corp., is shown here in market value terms. There are 12,000 shares of stock outstanding. The company has declared a dividend of $1.45 per share. The stock goes ex dividend tomorrow. Ignoring any tax effects, what is the stock selling for today? What will it sell for tomorrow? What will the balance sheet look like after the dividends are paid? Market Value Balance Sheet $ 49,300 355,000 Equity $404,300 Cash Fixed assets Total $404,300 Total $404,300arrow_forward16) Suppose Bank is trading share at 17$ today. The company pays dividend of 0.25. The analysts claimed that in one year, target price will be 32$. What is the expected return?arrow_forward
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- Question 7. Dividends on CCN corporation are expected to grow at a 9% per year. Assume that the discount rate on CCN is 12% and that the expected dividend per share in one year is $0.50. CCN has just paid a dividend, so the next dividend is the $0.50 to be paid one year from now. Calculate today's price per share fo CCN. *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.arrow_forward6. Stock Valuation Suppose you know that a company's stock currently sells for $67 per share and the required return on the stock is 10.8 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If it's the company's policy to always maintain a constant growth rate in its dividends, what is the current dividend per LO 1 share? Rurlchordt Corn paYs a constant $15 25 dividend on itsarrow_forward3. U.S Technologies preferred stock sells for $80 and pays $9 each year in dividends. What is the expected rate of return?arrow_forward
- [EXCEL] Zero growth: Nynet, Inc., paid a dividend of $4.18 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 18.5 percent, what is the current value of the stock? Please use Excel.arrow_forwardProblem #1: Stock prices. Anderson motors, Inc. Has just set the company dividend policy at $0.50 per year. The company plans to be in business forever. What is the price of this stock if an investor wants. A. a 5% return? B. a 8% return? C. a 10% return? D. a 13% return? E. a 20% return?arrow_forwardthe balance sheet look like after the dividends are paid? Q.4 Rudolph Corporation is evaluating an extra dividend versus a share repurchase. In either case, $11,000 would be spent. Current earnings are $1.40 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections in answering the first two questions. (a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. (b) What will be the effect on Rudolph's EPS and P/E ratio under the two different scenarios? (c) In the real world, provided tax deductions are made, which of these actions would you recommend? Why? O Search END OF ASSIGNMENT hp 11 - what will 0 1 W Varrow_forward
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Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY