A firm has a market value equal to its book value. Currently, the firm has excess cash$7,000 and other assets of $21,000. Equity is worth $28,00O. The firm has 600 shares of stockoutstanding and net income of $2,400. What will the stock price per share be if the fim pays out its excess cash as a cash dividend?Multiple Choice$64$43$35$39$60

Stock price per share is the price of company's stock prevailing in the market. It is used to…

Answered: A firm has a market value equal to its…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Based on a discounted free cash flow method, you have estimated the value of a company to be $720 million. The company has $145 million of long-term debt outstanding (common equity comprises the rest). There are 11.0 million shares of common stock outstanding. What is the firm's estimated value per share of common stock? 13.18 52.27 65.00 65.45 O 78.64
A firm has 7,000 outstanding shares with current value of 10£ per share. Planned dividend is £5 per share. What is the ex-dividend share price? How much is the share price if the company decides to use the cash it had originally earmarked for dividend for a share repurchase instead? A. £5, £10 B. £10, £5 C. £8, £10 D. £2, £12 ( explain well with step by step answer ).
Stock Expected Dividend Expected Capital Gain A $0 $10 B $5 $5 C $10 $0 A.) If each stock is priced at $175, what are the expected net precentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? B.) Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A,B, and C each sell for? Assume the expected dividend is a level perpetuity.
The following financial information is available on Rawls Manufacturing Company: Current per share market price $48.00 Current per share dividend $3.50 Current per share earnings $6.00 Beta 1.1 Expected rate of return on market 12.0% Risk-free rate 6.0% Expected long-term growth rate 5.0% Rawls can issue new common stock to net the company $44 per share. Determine the cost of external equity capital using the dividend capitalization model approach. (Compute the answer to the nearest 0.1%.) a 12.6% b. 14.4% c.13.4% d.12.7%
8. Assume IBM just paid a dividend of £4.50 and expects these dividends to grow at 8% a year. The ex-div price of IBM is £100 per share. What is IBM's cost of equity capital? A. 3.86% B. 8% C. 12.22% D. 12.86%
A firm that just paid a dividend of $2.60. It plans to increase dividends by 5% in year one, 10% in year two, 20% in year three, 20% in year four, and then 3% per year thereafter. You feel that a 16% required return is appropriate. What is this stock worth to you? Question 35Answer a. $4.23 b. $34.23 c. $28.18 d. $38.55
Suppose Beta Industries and Delta Technology have identical assets that generate identical cash flows. Beta Industries is an all-equity firm, with 7 million shares outstanding that trade for a price of $16.00 per share. Delta Technology has 22 million shares outstanding, as well as debt of $33.60 million. a. According to MM Proposition I, what is the stock price for Delta Technology? b. Suppose Delta Technology stock currently trades for $8.27 per share. What arbitrage opportunity is available? What assumptions are necessary to exploit this opportunity? a. According to MM Proposition I, what is the stock price for Delta Technology? According to MM Proposition I, the stock price per share for Delta Technology is $ (Round to the nearest cent.)
A firm has a dividend policy to pay a constant annual dividend of $0.40 per share to its common shareholders perpetually. If these shareholders required rate of return of 20%, what is the share price? Question 14 options: 1) $4 2) $2 3) $0.20 4) $0.40
7
Hewlard Pocket's market value balance sheet is given. Assets Liabilities and Shareholders' Equity A. Original balance sheet Cash Debt 150,000 950,000 Equity $1,100,000 Other assets 1,100,000 Value of firm Value of firm $1,100,000 Shares outstanding = 100,000 Price per share = $1,100,000 / 100,000 = $1 Pocket needs to hold on to $52,000 of cash for a future investment. Nevertheless, it decides to pay a cash dividend of $2.10 per share and to replace cash as needed with a new issue of shares. After the dividend is paid and the new stock is issued: a. What will be the price per share? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the total value of the company? (Enter your answers in whole dollars, not in millions.) c. What will be the total value of the stock held by new investors? (Enter your answers in whole dollars, not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) d. What…
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An IPO is offered at $9.50 per share for 7 million shares. The IPO underwriters had a spread of 7.25%. What price did the underwriters pay per share of the IPO firm? A. $8.81 B. $9.50 C. $8.86 D. $9.17 E. $10.19

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