Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 9, Problem 11P
Cooperton Mining just announced it will cut its dividend from $4 to $2.50 per share and use the extra funds to expand. Prior to the announcement, Cooperton’s dividends were expected to grow at a 3% rate, and its share price was $50. With the new expansion, Cooperton’s dividends are expected to grow at a 5% rate. What share price would you expect after the announcement? (Assume Cooperton’s risk is unchanged by the new expansion.) Is the expansion a positive
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Solution is incorrect. Can you try again with this:
Assume Evco, Inc. has a current stock price of $54.38 and will pay a
$2.05 dividend in one year; its equity cost of capital is 11%.
What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?
You are told by yourinvestment advisor that Laduma Co. is expected to earn R5 per share next year, R6 per share the following year and that
thereafter earnings are expected to grow by 8 percent per year. The dividend payout ratio is 60 percent and the required rate of return on Laduma
shares is 15 percent. If the current share price is R40, would you expect your adviser to make a buy, hold or sell recommendation? Iftransaction
costs are R2,50 per share, would you follow his advice?
Maynard Steel plans to pay a dividend of $2.82 this year. The company has an expected
earnings growth rate of 4.4% per year and an equity cost of capital of 10.4%.
a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant,
and that the firm does not issue or repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $0.95 this year and use the remaining $1.87
per share to repurchase shares. If Maynard's total payout rate remains constant,
estimate Maynard's share price.
a. Assuming that Maynard's dividend payout rate and expected growth rate remain constant,
and that the firm does not issue or repurchase shares, estimate Maynard's share price.
Maynard's share price will be $
(Round to the nearest cent.)
Chapter 9 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 9.1 - How do you calculate the total return of a stock?Ch. 9.1 - Prob. 2CCCh. 9.2 - In what three ways can a firm increase its future...Ch. 9.2 - Under what circumstances can a firm increase its...Ch. 9.3 - How does the growth rate used in the total payout...Ch. 9.3 - Prob. 2CCCh. 9.3 - Prob. 3CCCh. 9.4 - Prob. 1CCCh. 9.4 - What implicit assumptions are made when valuing a...Ch. 9.5 - State the efficient market hypothesis.
Ch. 9.5 - Prob. 2CCCh. 9 - Assume Evco, Inc., has a current price of 50 and...Ch. 9 - Anle corporation has a current price of 20, is...Ch. 9 - Suppose Acap Corporation will pay a dividend of...Ch. 9 - Prob. 4PCh. 9 - NoGrowth Corporation currently pays a dividend of...Ch. 9 - Summit Systems will pay a dividend of 1.50 this...Ch. 9 - Prob. 7PCh. 9 - Canadian-based mining company EI Dorado Gold (EGO)...Ch. 9 - In 2006 and 2007, Kenneth Cole Productions (KCP)...Ch. 9 - DFB, Inc., expects earnings at the end of this...Ch. 9 - Cooperton Mining just announced it will cut its...Ch. 9 - Procter and Gamble (PG) paid an annual dividend of...Ch. 9 - Colgate-Palmolive Company has just paid an annual...Ch. 9 - Prob. 14PCh. 9 - Halliford Corporation expects to have earnings...Ch. 9 - Prob. 16PCh. 9 - Maynard Steel plans to pay a dividend of 3 this...Ch. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Suppose that In January 2006, Kenneth Cole...Ch. 9 - In addition to footwear, Kenneth Cole Productions...Ch. 9 - You read in the paper that Summit Systems from...Ch. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33P
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