Alphabet (GOOGL) has yet to pay a dividend, but in spring 2018 it announced it would repurchase $8.5 billion worth of shares over the year. (Actually, the exact amount was $8.589,869,056-known as a "perfect" number because it is equal to the sum of its divisors). If the amount spent on share repurchases were expected to grow by 6.6% per year, and Alphabet's equity cost of capital is 7.9%, estimate Alphabet's market capitalization. If Alphabet has 710 million shares outstanding, what stock price does this correspond to? The share price is $ (Round to the nearest cent.) XX

Alphabet (GOOGL) has yet to pay a dividend, but in spring 2018 it announced it would repurchase $8.5 billion worth of shares over the year. (Actually, the exact amount was $8.589,869,056-known as a "perfect" number because it is equal to the sum of its divisors). If the amount spent on share repurchases were expected to grow by 6.6% per year, and Alphabet's equity cost of capital is 7.9%, estimate Alphabet's market capitalization. If Alphabet has 710 million shares outstanding, what stock price does this correspond to? The share price is $ (Round to the nearest cent.) XX

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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Suppose Compco Systems pays no dividends but spent $5.15 billion on share repurchases last year. If Compco's equity cost of capital is 12.3%, and if the amount spent on repurchases is expected to grow by 8.9% per year, estimate Compco's market capitalization. If Compco has 5.9 billion shares outstanding, to what stock price does this correspond?
A firm's board of directors has authorized total dividend distributions of $16 million one year from now and $25 million two years from now. Three years from now, the firm will discontinue paying dividends. Instead, the firm will spend a total of $28 million to repurchase shares. (No new stock issuances are planned.) Beginning in the fourth year, the amount spent on net repurchases is expected to grow at an annual rate of 2% forever. There are 7 million common shares outstanding and the annual equity cost of capital is 8.4 percent. What is value today per share?
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.)
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Procter and Gamble (PG) paid an annual dividend of $2.83 in 2021. You expect PG to increase its dividends by 7.5% per year for the next five years (through 2026), and thereafter by 3.2% per year. If the appropriate equity cost of capital for Procter and Gamble is 8.5% per year, use the dividend-discount model to estimate its value per share at the end of 2021.
Mokoko Ltd. is considering a number projects and thus need to estimate its cost of capital in order to estimate their NPV. The company’s current dividend is $2.25 per share, which has grown steadily at 6% each year for over a decade and is expected to continue doing so. Its stock currently trades at $26 and there are 2 million shares outstanding. The company’s 100,000 preferred shares trade at $22 and pay annual dividends of $3. Cash and marketable securities on the company’s balance sheet total $30.5 million and the firm pays a tax rate of 30%. Their existing long-term debt (face value of $100 million, semi-annual payments) pays a 9.5% coupon and has 12 years remaining before maturity. Due to current conditions, the required rate of return (yield to maturity) on this debt is 11% and any new debt issuance would be required to offer the same yield to investors (there is no term premium for 1 year vs 12 year debt). What is Mokoko Ltd's Debt/Equity ratio? Assuming the firm wants to…
The financial statements of Inland Engineering are provided below. The firm has 100 million shares outstanding at the end of 2020 and the stock price was $10. The firm plans to increase its fixed assets by 26% in 2021 (from the 2020 level) from an increase in equity alone. What level of stock price would allow the firm to execute its plan while maintaining its return-on-equity and P/E ratio? Assume that the firm will not raise additional capital by increase the number of shares in the stock market (i.e., the outstanding shares at the end of 2021 will remain at 100 million). (provide your answer in the nearest dollar, i.e., no decimal places) Balance Sheet Statement, 2020 (in $million) Income Statement, 2020 (in $million) Current assets 836 Gross sales 2,295 Fixed assets 1,161 Cost of goods sold (771) Current debt 210 Operating expenses (404) Long-term debt (170) 283 Income taxes
Vijay
Procter and Gamble (PG) paid an annual dividend of $2.79 in 2021. You expect PG to increase its dividends by 7.6% per year for the next five years (through 2026), and thereafter by 3.3% per year. If the appropriate equity cost of capital for Procter and Gamble is 8.4% per year, use the dividend-discount model to estimate its value per share at the end of 2021.
Little Oil has outstanding 1 million shares with a total market value of $29 million. The firm is expected to pay $1.00 million of dividends next year, and thereafter, the amount paid out is expected to grow by 5% a year in perpetuity. Thus, the expected dividend is $1.05 million in year 2, $1.1025 million in year 3, and so on. However, the company has heard that the value of a share depends on the flow of dividends, and therefore, it announces that next year's dividend will be increased to $2 million and that the extra cash will be raised immediately afterward by an issue of shares. After that, the total amount paid out each year will be as previously forecasted, that is, $1.05 million in year 2 and increasing by 5% in each subsequent year. A. At what price will the new shares be issued in year 1? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. B. How many shares will the firm need to issue? Note: Do not round intermediate calculations. Round your…

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