b. How many shares will the firm need to issue? (Do notround intermediate calculations. Round your answer to thenearest whole number.)c. What will be the expected dividend payments on these newshares, and what, therefore, will be paid out to the oldshareholders after year 1? (Do not round intermediatecalculations. Round your answer to 2 decimal places.)d. Recalculate the present value of the Price per share tocurrent shareholders. (Do not round intermediatecalculations. Round your answer to the nearest wholedollar.)X Answer is not complete.Price per shareNumber of shares$21.00а.b.Dividend per share$1.04 Xc.d.Present value%24%24 Little Oil has outstanding 1 million shares with a total marketvalue of $21 million. The firm is expected to pay $1.00 millionof dividends next year, and thereafter, the amount paid out isexpected to grow by 4% a year in perpetuity. Thus, theexpected dividend is $1.04 million in year 2, $1.0816 million inyear 3, and so on. However, the company has heard that thevalue of a share depends on the flow of dividends, andtherefore, it announces that next year's dividend will beincreased to $2 million and that the extra cash will be raisedimmediately afterward by an issue of shares. After that, thetotal amount paid out each year will be as previouslyforecasted, that is, $1.04 million in year 2 and increasing by4% in each subsequent year.a. At what price will the new shares be issued in year 1? (Donot round intermediate calculations. Round your answer to2 decimal places.)b. How many shares will the firm need to issue? (Do notround intermediate calculations. Round your answer to thenearest whole number.)c. What will be the expected dividend payments on these newshares, and what, therefore, will be paid out to the oldshareholders after year 1? (Do not round intermediatecalculations. Round your answer to 2 decimal places.)d. Recalculate the present value of the Price per share tocurrent shareholders. (Do not round intermediatecalculations. Round your answer to the nearest wholedollar.)

a) Cost of equity = expected dividend next year/market value + constant growth rate = $1 million/$20…

Answered: ɔ. How many shares will the firm need…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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assume evco, inc., has a current stock price of $59 and will pay a $1.75 dividend in one year; its equity cost of capital is 13%. 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? the expected price is $ (round to the nearest cent.)
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.
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.
XYZ Inc., has an odd dividend policy. The company has just paid a dividend of $11.00 per share and has announced that it will increase the dividend by $9.00 per share for each of the next four years, and then never pay another dividend. If you require a return of 16 percent on the company’s stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Bha
In the above example, suppose the firm had paid $80 per share when buying back shares with its $100 in cash. (Assume that the firm can buy back fractional shares.) In this and the following two questions, fill in the blanks in the table below. Cash Other assets Total market value of stock Shares Share price Do not use $ sign. Answer to nearest whole number. The missing value for a is: Before buyback $100 $400 $500 10 $50 After buyback 0 $400 a b C
Blue Corp. is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would be spent. Current earnings are $1.11 per share and the stock currently sells for $42 per share. There are 2,500 shares outstanding. Ignore taxes and other imperfections. If Blue Corp. pays a dividend, what will be the dividend per share? After the dividend is paid, how many shares will be outstanding and what will the price per share be? Enter your answers rounded to 2 DECIMAL PLACES. NOTE: Fractional shares are possible (Ex. 0.49 shares) Dividend 2.2 ☑ Correct response: 2.2±0.01 Shares outstanding = 2500 Correct response: 2,500 Stock price = 39.8 Correct response: 39.8±0.01 Click "Verify" to proceed to the next part of the question. After the $2.2 dividend, the price falls to $39.8 per share. What are earnings per share (EPS) and the price earnings (P/E) ratio? Enter your answers rounded to 2 DECIMAL PLACES. EPS = Number P/E RatioNumber Click "Verify" to proceed to the next part of the…
If you require a return of 12 percent on this stock, what will you pay for a share today?
Assume Evco, Inc. has a current stock price of $48.64 and will pay a $2.25 dividend in one year; its equity cost of capital is 10%. 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? We can expect Evco stock to sell for $. (Round to the nearest cent.)
Assume Evco, Inc. has a current stock price of $49. 11 and will pay a $2.25 dividend in one year, its equity cost of capital is 18%. 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? We can expect Evco stock to sell for $ ( Round to the nearest cent.)
What about for these? (b) Suppose you have purchased some GameStop shares on margin at $5per share. You ask your broker to put in a limit sell order at $7, anda stop loss order at $4.50.i. What will happen if the stock price falls to $4.50?ii. What will happen if the stock price rises to $7?iii. Now suppose you had instead short-sold your GameStop shares(as in the first part of the question). What instructions mightyou give to your broker to minimise your losses and lock in yourgains?

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