Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
11th Edition
ISBN: 9780077861759
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 19, Problem 15QP
a.
Summary Introduction
To determine: The Share price of Company’s stock.
Introduction: A dividend policy is an organization's way to deal with disseminating revenues back to its proprietors or investors. In the event that an organization is in a development stage, it might conclude that it won't pay profits, but instead re-contribute its
b.
Summary Introduction
To determine: The Number of Shares to be purchased.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Question:
Gibson 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 $15 million. The company is entirely financed
with equity and has 600,000 shares outstanding. Assume the dividend tax rate is zero.
a. What is the share price of the Gibson stock?
b. Suppose the board of directors of Gibson Co. announces its plan to pay out 50 percent of
its current cash flow as cash dividends to its shareholders. How can Jeff Miller, who owns
1,000 shares of Gibson stock, achieve a zero payout policy on his own?
Morgan Stanley has a current cash flow (at
time 0) of $3.4 m and pays no dividends. The
present value of the company's future cash
flows is $14.6 m. The firm is entirely financed
with equity and has 400,000 shares
outstanding. Assume the dividend tax rate is
zero.
a. What is the share price of Morgan Stanley
stock?
b. Suppose the board of directors of Morgan
Stanley announces its plan to payout 40% of
its current cash flow as dividends to its
shareholders. How can Andy, who owns 800
shares of Morgan Stanley stock, achieve a
zero payout policy on his own?
formulation:
DPS= Tol Div (or excess cash) / No. of share
[for unlevered firm] Share price = V/no. of
share
P ex-div = P - DPS
EPS= Earnings (assume a constant) / no. of
share
P.E. = stock price/ EPS
No. of share repurchase = Excess Cash / Stock
Price
fix and give correct answers please. i will upvote!
Chapter 19 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 19 - Dividend Policy Irrelevance How is it possible...Ch. 19 - Stock Repurchases What is the impact of a stock...Ch. 19 - Dividend Policy It is sometimes suggested that...Ch. 19 - Dividend Chronology On Tuesday, December 8,...Ch. 19 - Prob. 5CQCh. 19 - Prob. 6CQCh. 19 - Dividends and Stock Price Last month, Central...Ch. 19 - Prob. 8CQCh. 19 - Dividend Policy For initial public offerings of...Ch. 19 - Investment and Dividends The Phew Charitable Trust...
Ch. 19 - Use the following information to answer the next...Ch. 19 - Stock Repurchases How do you think this tax law...Ch. 19 - Dividends and Stock Value The growing perpetuity...Ch. 19 - Bird-in-the-Hand Argument The bird-in-the-hand...Ch. 19 - Dividends and Income Preference The desire for...Ch. 19 - Dividends and Clientele Cap Henderson owns Neotech...Ch. 19 - Prob. 17CQCh. 19 - Prob. 18CQCh. 19 - Prob. 19CQCh. 19 - Prob. 20CQCh. 19 - Prob. 1QPCh. 19 - Stock Dividends The owners equity accounts for...Ch. 19 - Prob. 3QPCh. 19 - Stock Splits and Stock Dividends Roll Corporation...Ch. 19 - Prob. 5QPCh. 19 - Share Repurchase In the previous problem, suppose...Ch. 19 - Prob. 7QPCh. 19 - Prob. 8QPCh. 19 - Prob. 9QPCh. 19 - Prob. 10QPCh. 19 - Prob. 11QPCh. 19 - Prob. 12QPCh. 19 - Stock Repurchase Flychucker Corporation is...Ch. 19 - Prob. 14QPCh. 19 - Prob. 15QPCh. 19 - Prob. 16QPCh. 19 - Prob. 17QPCh. 19 - Prob. 18QPCh. 19 - Prob. 19QPCh. 19 - Prob. 20QPCh. 19 - Prob. 1MCCh. 19 - Jessica believes that the company should use the...Ch. 19 - Prob. 3MCCh. 19 - Another option discussed by Tom, Jessica, and...Ch. 19 - Prob. 5MCCh. 19 - Does the question of whether the company should...
Knowledge Booster
Learn more about
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
- Optimized Co. 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 $18 million. The company is entirely financed with equity and has 780,000 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.) 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.)arrow_forwardOptimized 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◄◄arrow_forwardPlato Corporation’s board announces to pay $2 million excess cash to shareholders. At the announcement, the firm has no debt and 1 million shares outstanding with the market value of equity of $12 million. Assume that the markets are perfect. (i) What is the cum-dividend price? (ii) If the firm distributes the excess cash as a cash dividend, what is the exdividend price? Is the drop in share price the same as the cash dividend per share? Why? (iii) If the firm distributes the excess cash as a share repurchase, what will its share price once the shares are repurchased? (iv) If you hold 1,000 shares and the firm distributes the excess cash as a share repurchase in part (iii). How do you use homemade dividend to receive a cash dividend as in part (ii)?arrow_forward
- General Accountingarrow_forwardNonearrow_forwardMahomes 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 is entirely financed with equity and has 770,000 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 1,200 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 toarrow_forward
- The market value balance sheet for Apple Pie Corp. reflects cash of $42,000, fixed assets of $319,000, and equity of $237,000. There are 7,500 shares of stock outstanding with a par value of $1 per share. The company has declared a dividend of $1.03 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. What will be the price of the stock tomorrow morning?arrow_forwardThe balance sheet for Tempest, Inc., Is shown here in market value terms. There are 27,000 shares of stock outstanding. Market Value Balance Sheet Cash $ 117,000 489,960 Equity Fixed assets $606,960 Total $606,960 Total $606,960 The company has declared a dividend of $1.40 per share. The stock goes ex dividend tomorrow. Ignore any tax effects. a. What is the stock selling for today? (Do not round intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.) b. What will it sell for tomorrow? (Do not round Intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.) a. Stock price today b. Stock price tomorrow c. What will the balance sheet look like after the dividends are pald? (Do not round Intermedlate calculations and round your answers to the nearest whole number, e.g., 32.) Cash Fixed assets Equity Total Totalarrow_forwardAssume that company A wants to boost its stock price. The company currently has 20 million shares outstanding with a market price of $21 per share and no debt. A has had consistently stable earnings, and pays a 35% tax rate. Management plans to borrow $50 million on a permanent basis and they will use the borrowed funds to repurchase outstanding shares. If shareholders are perfectly rational and informed, what will the repurchase price per share be (keep two decimal places and assume that the new borrowing will not have any negative effects)?arrow_forward
- 1. Northstar Corporation is considering to pay $10,000 the shareholders. There are 1,000 shares outstanding and the current share price is $50, the current earnings are $20 per share. a. What is the ex-dividend price of Northstar' stock? b. How can Bob, who owns 50 shares of Northstar, achieve a zero payout policy on his own? c. How do the stock price and shares outstanding change if the company spend $10,000 to repurchase stocks rather than paying cash dividends? d. How the EPS and PE ratio change after the dividend payment and share repurchase, respectively? e. If the payout ratio remain consistent, the adjustment rate is 0.3 defined in the Lintner model, and this company expects to have an earnings per share of 25 for next year, what is the dividend one year from now?arrow_forwardNeed answer the accounting questionarrow_forwardXtel Inc. with a total market value of $630 million has $30 million in excess cash and no debt. Xtel has 1 million shares outstanding. Xtelʹs board is meeng to decide whether to pay out its $30 million in excess cash as a special dividend or to use it to repurchase shares of the firm’s stock. You own 1,000 shares of Xtel stock. 1. Assume that Xtel uses the entire $30 million in excess cash to pay a special dividend. Calculate Xtelʹs ex-dividend price. Briefly explain your workings. 2. Assume that Xtel uses the entire $30 million to repurchase shares at a current share price. How many shares will Xtel repurchase? Briefly explain your workings.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Projections for Startups Basic Walkthrough; Author: Mike Lingle;https://www.youtube.com/watch?v=7avegQF4dxI;License: Standard youtube license