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
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 2, Problem 3QP
Dividends and
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
8. Dividend yield is the amount of
money that an investor typically gets
back through dividends. Which of
these is a typical dividend yield for any
company?
Hint
0.00000003%
O 300%
100%
3%
Suppose a firm is paying dividend of $500000 out of net income of $2 million. What is the firm's payout ratio?
10. [EXCEL] Percent of sales: Given the data for Cattail Corporation in Problem 9, if you assume that all balance sheet items also vary with the change in sales, develop a pro forma balance sheet for Cattail for the next fiscal year. Assuming that the firm did not sell or repurchase stock, what is the cash dividend implied by the pro forma income statement and balance sheet?
Problem 9:
[EXCEL] Percent of sales: Cattail Corporation's financial statements for the fiscal year just ended are shown below:
Cattail Corporation
Financial Statements for the Fiscal Year Just Ended
Income Statement
Balance Sheet
Net Sales
$ 1,500,000
Assets
$ 700,000
Debt
$ 600,000
Costs
350,000
Equity
100,000
Net Income
$ 1,150,000
Total
$ 700,000
Total
$ 700,000
Cattail management expects sales to increase by 14 percent next year. Assume that the financial statement accounts vary directly with changes in…
Chapter 2 Solutions
Fundamentals of Corporate Finance
Ch. 2.1 - Prob. 2.1ACQCh. 2.1 - What is liquidity? Why is it important?Ch. 2.1 - What do we mean by financial leverage?Ch. 2.1 - Explain the difference between accounting value...Ch. 2.2 - What is the income statement equation?Ch. 2.2 - Prob. 2.2BCQCh. 2.2 - Why is accounting income not the same as cash...Ch. 2.3 - What is the difference between a marginal and an...Ch. 2.3 - Do the wealthiest corporations receive a tax break...Ch. 2.4 - Prob. 2.4ACQ
Ch. 2.4 - Prob. 2.4BCQCh. 2.4 - Why is interest paid not a component of operating...Ch. 2 - What types of accounts are the most liquid?Ch. 2 - What is an example of a noncash expense?Ch. 2 - The marginal tax rate is the tax rate which...Ch. 2 - Prob. 2.4CTFCh. 2 - Prob. 1CRCTCh. 2 - Accounting and Cash flows [LO2] Why might the...Ch. 2 - Prob. 3CRCTCh. 2 - Operating Cash Flow [LO2] In comparing accounting...Ch. 2 - Prob. 5CRCTCh. 2 - Cash Flow from Assets [LO4] Suppose a companys...Ch. 2 - Prob. 7CRCTCh. 2 - Net Working Capital and Capital Spending [LO4]...Ch. 2 - Prob. 9CRCTCh. 2 - Prob. 10CRCTCh. 2 - Prob. 11CRCTCh. 2 - Earnings Management [LO2] Companies often try to...Ch. 2 - Building a Balance Sheet [LO1] KCCO, Inc., has...Ch. 2 - Building an Income Statement [LO1] Billys...Ch. 2 - Dividends and Retained Earnings [LO1] Suppose the...Ch. 2 - Prob. 4QPCh. 2 - Calculating Taxes [LO3] The Dyrdek Co. had 267,000...Ch. 2 - Prob. 6QPCh. 2 - Calculating OCF [LO4] Ridiculousness, Inc., has...Ch. 2 - Calculating Net Capital Spending [LO4] Bowyer...Ch. 2 - Calculating Additions to NWC [LO4] The 2014...Ch. 2 - Cash Flow to Creditors [LO4] The 2014 balance...Ch. 2 - Cash Flow to Stockholders [LO4] The 2014 balance...Ch. 2 - Prob. 12QPCh. 2 - Market Values and Book Values [LO1] Klingon...Ch. 2 - Prob. 14QPCh. 2 - Using Income Statements [LO1] Given the following...Ch. 2 - Preparing a Balance Sheet [LO1] Prepare a 2015...Ch. 2 - Prob. 17QPCh. 2 - Prob. 18QPCh. 2 - Net Income and OCF [LO2] During 2014, Raines...Ch. 2 - Prob. 20QPCh. 2 - Prob. 21QPCh. 2 - Calculating Cash Flows [LO4] Consider the...Ch. 2 - Net Fixed Assets and Depreciation [LO4] On the...Ch. 2 - Prob. 24QPCh. 2 - Use the following information for Taco Swell,...Ch. 2 - Use the following information for Taco Swell,...Ch. 2 - Prob. 1MCh. 2 - Prob. 2M
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
- What is the amount of cash dividends to be paid if a $2 per share dividend is declared? 10K, 90K or 80K?arrow_forward12. Which of the following statements is CORRECT? a. Miller and Modigliani's dividend irrelevance theory says that the percentage of its earnings that a firm pays out in dividends has no effect on its cost of capital, but it does affect its stock price. b. Suppose a firm that has been earning $2 and paying a dividend of $1.00, or a 50% dividend payout, announces that it is increasing the dividend to $1.50. The stock price then jumps from $20 to $30. Some people would argue that this is proof that investors prefer dividends to retained earnings. Miller and Modigliani would agree with this argument. c. Other things held constant, the higher a firm's target dividend payout ratio, the higher its expected growth rate should be. d. The federal government sometimes taxes dividends and capital gains at different rates. Other things held constant, an increase in the tax rate on dividends relative to that on capital gains would logically lead to a decrease in dividend payout ratios. e. If…arrow_forward7. Flatline Inc currently will pay a cash dividend of $2. Its price on the ex-dividend day is $40. What's the most likely price of Flatline on the day before the ex-dividend day? A. $40 B. $42 C. $38 D. $20 E. $2arrow_forward
- Question 21 As the assistant to the CFO of Johnstone Inc., you must estimate its cost of common equity. You have been provided with the following data: D 0 = $0.80; P 0 = $22.50; and g L = 8.00% (constant). Based on the dividend growth model, what is the cost of common from reinvested earnings? a. 11.25% b. 10.69% c. 11.84% d. 12.43% e. 13.05% Muscarella Inc. has the following balance sheet and income statement data: Cash $ 14,000 Accounts payable $ 42,000 Receivables 70,000 Other current liabilities 28,000 Inventories 210,000 Total CL $ 70,000 Total CA $294,000 Long-term debt 70,000 Net fixed assets 126,000 Common equity 280,000 Total assets $420,000 Total liab. and equity $420,000 Sales $280,000 Net income $ 21,000 The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70,…arrow_forwarda. How would a firm’s decision to pay out a higher percentage of its earnings as dividendsaffect each of the following?1. The value of its long-term warrants2. The likelihood that its convertible bonds will be converted3. The likelihood that its warrants will be exercisedb. If you owned the warrants or convertibles of a company, would you be pleased or displeasedif it raised its payout rate from 20% to 80%? Why?arrow_forward10. [EXCEL] Percent of sales: Given the data for Cattail Corporation in Problem 9, if you assume that all balance sheet items also vary with the change in sales, develop a pro forma balance sheet for Cattail for the next fiscal year. Assuming that the firm did not sell or repurchase stock, what is the cash dividend implied by the pro forma income statement and balance sheet? Please use excel. 9. [EXCEL] Percent of sales: Cattail Corporation's financial statements for the fiscal year just ended are shown below: Income Statement Balance Sheet Net sales $1,500 Assets $700 Debt $600 Costs $350 _____ Equity $100 Net income $1,150 Total $700 Total $700 Cattail management expects sales to increase by 14 percent next year. Assume that the financial statement accounts vary directly with changes in sales and that management has no financing plan at this time. Given this information, develop a pro forma income…arrow_forward
- QUESTION 16 What must occur to make using net cash flows into the firm result in the same estimate of value as using dividends paid out of the firm? OA. the firm must pay an increasing dividend payment each year OB. The cost of equity must be greater than the overall WACC OC. the firm must generate a rate of return on reinvested free cash flow equal to the discount rate used by the investor D. All of the above must occurarrow_forwardPlease help me solve question 7.2a. I able to calculate the price of the stock is $25 and dividend yield is 2%. I need help solve capital gain rate. Sh9arrow_forwardFor the companies Lockheed-Martin (LMT) & Northrop-Grumman (NOC) • • • [5 pts] Use Macrotrends data to calculate Return on Sales, Return on Assets, Debt Ratio, Inventory Turnover, Lead Time for each company [4 pts] Use Fintel to determine EPS forecasts for 2024-2027 for each company, and use those to calculate an average earnings growth rate for each - https://fintel.io/sfo/us/Imt https://fintel.io/sfo/us/noc [4 pts] Assuming MARR = WACC + 3%, calculate a fair market price for the stock of each company, assuming that earnings grow at the calculated rate for the next 50 years, with the following WACC LMT: NOC: 8.00% 8.25% [2 pts] Find the current stock price for each company [5 pts) Based on the above calculations, which company's stock would you buy, and provide your reasoning (If neither or both, explain reasoning)arrow_forward
- 35 A company wants to increase its return on equity ratio. How can this be accomplished? An increase in the amount of mortgage debt A decrease in the amount of preferred dividends A decrease in the amount of net income An increase in the amount of preferred stock dividends NEXT 3 A BOOKMARKarrow_forwardTrue or False, pls explain why 11) The peso amount of dividend changes yearly in a constant dividend payout policy True Falsearrow_forwardBusiness Finance » The present value of JECK Co.'s expected free cash flow is $100 million. If JECK has $30 million in debt, $6 million in cash, and 2 million s... Question Bha The present value of JECK Co.'s expected free cash flow is $100 million. If JECK has $30 million in debt, $6 million in cash, and 2 million shares outstanding, what is its share price? The company's share price is $ (Round to the nearest cent.) Expert Solution C Transcribed Image Text: The present value of JECK Co.'s expected free cash flow is $100 million. If JECK has $30 million in debt, $6 million in cash, and 2 million shares outstanding, what is its share price? The company's share price is $ (Round to the nearest cent.)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Fundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Financial leverage explained; Author: The Finance story teller;https://www.youtube.com/watch?v=GESzfA9odgE;License: Standard YouTube License, CC-BY