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Taco Time Corporation is evaluating an extra dividend versus a share repurchase. In either case, $22,960 would be spent. Current earnings are $3.80 per share, and the stock currently sells for $92 per share. There are 4,100 shares outstanding. Ignore taxes and other imperfections. What will the company’s EPS and PE ratio be under the two different scenarios?
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- Cooperton Mining just announced it will cut its dividend from $3.95 to $2.34 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.5% rate, and its share price was $50.67. With the planned expansion, Cooperton's dividends are expected to grow at a 4.8% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good investment? The new price for Cooperton's stock will be $. (Round to the nearest cent.)Cooperton Mining just announced it will cut its dividend from $4.25 to $2.29 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.1% rate, and its share price was $50.34. With the planned expansion, Cooperton's dividends are expected to grow at a 4.9% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good investment? The new price for Cooperton's stock will be $. (Round to the nearest cent.) Is the expansion a good investment? (Select from the drop-down menu.) a good investment.Tecumseh Inc. is analyzing the possible merger with Devonshire Inc. Savings from the merger are estimated to be a one-time after-tax benefit of $156 million. Devonshire Inc. has 5.2 million shares outstanding at a current market price of $82 per share. What is the maximum cash price per share that could be paid for Devonshire Inc.? (Omit "$" sign in your response.) Maximum cash price per share $
- Hawar International is a shipping firm with a current share price of $4.50 and 10 million shares outstanding. Suppose Hawar announces plans to lower its corporate taxes by borrowing $10 million and repurchasing shares. a. With perfect capital markets, what will the share price be after this announcement? b. Suppose that Hawar pays a corporate tax rate of 40%, and that shareholders expect the change in debt to be permanent. If the only imperfection is corporate taxes, what will the share price be after this announcement? c. Suppose the only imperfections are corporate taxes and financial distress costs. If the share price rises to $4.55 after this announcement, what is the PV of financial distress costs Hawar will incur as the result of this new debt? Question content area bottom Part 1 a. With perfect capital markets, what will the share price be after this announcement? With perfect capital markets, the share price will be $enter your response here per shareA1. Payout policy (Answer all parts of this question.) (a) , What is the main theorem of Modigliani and Miller regarding the payout policy of firms? Explain. 1 (b) List four assumptions that must hold for the Modigliani-Miller theorem to be valid. (c) Consider a company that has 100 million shares outstanding. The market value of the company is currently at GBP 5 billion. Last year, the company paid out an annual dividend of GBP 2 per share. This year, the company intends to double the dividend to shareholders, but since the company has not enough cash, the company intends to raise the additional money required to pay the dividend in rights issue. i. ( If the price of a new share offered is GBP 25, what is the fair value of a right to buy a new share? Hint: The company first pays the dividends, and then raises the capital. ii. ( ) Contrary to theory, however, as soon as the company announces the rights issue, the share price drops. Why? Think of a reason why this transaction, i.e.,…Becker industries is considering an all equity capital structure against one with both debt and equity. The all equity capital structure would consist of 34000 shares of stock. The debt and equity option would consist of 17000 shares of stock plus $265000 of debt with an interest rate of 8 percent. What is the break even level of earnings before interest and taxes between these two options? Ignore taxes
- Cooperton Mining just announced it will cut its dividend from $3.92 to $2.43 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.1% rate, and its share price was $51.64. With the planned expansion, Cooperton's dividends are expected to grow at a 4.7% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good investment? The new price for Cooperton's stock will be $. (Round to the nearest cent.)Cooperton Mining just announced it will cut its dividend from $4.03 to $2.69 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.3% rate, and its share price was $48.51. With the planned expansion, Cooperton's dividends are expected to grow at a 4.6% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good investment? The new price for Cooperton's stock will be $ (Round to the nearest cent.)Cooperton Mining just announced it will cut its dividend from $4.08 to $2.45 per share and use the extra funds to expand. Prior to the announcement, Cooperton's dividends were expected to grow at a 3.5% rate, and its share price was $49.63. With the planned expansion, Cooperton's dividends are expected to grow at a 4.8% rate. What share price would you expect after the announcement? (Assume that the new expansion does not change Cooperton's risk.) Is the expansion a good investment? The new price for Cooperton's stock will be $ (Round to the nearest cent.)
- Transco is considering acquiring Tenco. Tenco's current stock price is $23. What is the maximum price per share that Transco should offer based on the following data for Tenco: PV of future cash flows $200 million, 20 million outstanding shares, no debt, and discount rate of 12%?Labrador technologies Inc. plans to become public soon. The current owners would like to know the value of each share of common equity so they price their shares correctly for potential investors. The WACC for this firm is 10.46% and there are 63,314 common shares outstanding. The firm has outstanding debt with a market value of $2,840,088 and has no preferred equity. Use the DCF valuation model based on the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 2.8% rate after Year 5. Rounding to the nearest penny, what is the value of each share of common stock? Period Free Cash Flow Year 1 $1,004,648 Year 2 $1,442,144 Year 3 $1,311,927 Year 4 $2,319,814 Year 5 $2,598,958Ewing Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000 would be spent. Current earnings are $3 per share, and the stock currently sells for $50 per share. There are 5,000 shares outstanding. Ignore taxes and other market imperfections (e.g. transaction cost) in answering the 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 Ewing’s EPS and PE ratio under the two different scenarios?
