A firm has a market value equal to its book value. Currently, the firm has excess cash of $7,500 and other assets of $23,500. Equity is worth $31,000. The firm has 500 shares of stock outstanding and net income of $3,000. What will the stock price per share be if the firm pays out its excess cash as a cash dividend? $50 $53 $59 $47

A firm has a market value equal to its book value. Currently, the firm has excess cash of $7,500 and other assets of $23,500. Equity is worth $31,000. The firm has 500 shares of stock outstanding and net income of $3,000. What will the stock price per share be if the firm pays out its excess cash as a cash dividend? $50 $53 $59 $47

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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CO A has cash flows of $0.76 per share, earnings of $1.25 per share and 115,000 shares outstanding. Co B. is a comparable public company with a price of $S60 per share, cash flows of $2.14 per share, and 510,000 shares outstanding. If CoBis a sufficiently comparable company, what do you estimate Co B. price per share to be? Assume: Risk free rate 4% Market risk premium 7% Cost of debt 4%, beta of debt is 0. Tax rate 23%
Please show work in Excel.
Question 1: Suppose you own 100 shares of General Motors stock, and the company earned $6 per share during the last reporting period. Suppose also that GM could either pay all of its earnings out as dividends (in which case you would receive $600) or retain the earnings in the business, buy more assets, and cause the price of the stock to increase by $6 per share (in which case the value of your stock would rise by $600). a. How would the tax laws influence what you, as a typical stockholder, would want the company to do? b. Would your choice be influenced by how much other income you had? Why might the desires of a 35-year-old doctor differ with respect to corporate dividend policy from the desires of a retiree living on a small income? c. How might the corporation’s decision with regard to the dividends it pays influence the price of its stock?
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's current market value of equity is $100 million. It has one million shares outstanding. The firm's equity multiplier is one, and it had sales of $50 million last year. Its profit margin was 5%. What is the firm's implied price-earnings ratio? O 40 O5 O 16 O 20 0 8
A firm’s present market price of the share is Rs 55 and its EPS is Rs 18. The firm is planning to declare 55 percent of this as dividends. If the firm reinvests its retained earnings at the rate of 13 percent, the cost of its equity according to Gordon dividend capitalization model is a. 20 percent b. 40 percent c. 41.55 percent d. 23.85 percent
Which would increase a firm's return on equity? A. Issuance of 12% bonds and investing the proceeds to earn more than 12%. B. Increasing the size of cash dividends to shareholders. C. Increase in the firm's price earnings ratio D. Increase in market price of the firm's ordinary share E. none of the above
Give typing answer with explanation and conclusion A share of common stock is paying $3.50 per share, but the corporation only pays 40% of its earnings as cash dividends. The anticipated growth of this stock is 8%. Find the value of this stock if an investor wants a yield of 10%. If the stock is selling for $45, what is the expected yield?
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
Based on a discounted free cash flow method, you have estimated the value of a firm to be $270 million. The company has $110 million of long-term debt outstanding (common equity comprises the rest). There are 14.0 million shares of common stock outstanding. What is the firm's estimated intrinsic value per share of common stock?

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