Assume that you own 100% of a company worth 12 million dirhams represented by 4 million shares of stock. Suppose you are now thinking about issuing additional shares of sta to raise cash for expansion purposes. Therefore, you raise 6 million dirhams by selling an additional 2 million shares of stock at book value in the stock market. After the sale of ti new shares of stock, you own of the company. And, if a year later heavy loses have decreased the value of the company by 25%, the new book value per share is O a. 66.7 percent - 2.25 dirham Ob.33.3 percent - 2.25 dirhams Oc 62.5 percent - 1.6 dirhams Od. 66.7 percent - 1.6 dirhams Oe. 33.3 percent - 3.9 dirhams

Assume that you own 100% of a company worth 12 million dirhams represented by 4 million shares of stock. Suppose you are now thinking about issuing additional shares of sta to raise cash for expansion purposes. Therefore, you raise 6 million dirhams by selling an additional 2 million shares of stock at book value in the stock market. After the sale of ti new shares of stock, you own of the company. And, if a year later heavy loses have decreased the value of the company by 25%, the new book value per share is O a. 66.7 percent - 2.25 dirham Ob.33.3 percent - 2.25 dirhams Oc 62.5 percent - 1.6 dirhams Od. 66.7 percent - 1.6 dirhams Oe. 33.3 percent - 3.9 dirhams

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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Your company will produce a free cash flow for equity holders (FCFE) equal to 5 millions this year and 10 millions next year when the company will be liquidated. You own 5% of the equity of the company. The company is planning to pay out more than the FCFE at the end of the first year by issuing 3,000,000 worth of new equity (assume that the money raised via equity issuance is used to pay the dividend to both current and new shareholders). If the equity expected return is 9% and there are 500,000 shares outstanding, what are the dividends paid at the end of the first and the second year?
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You are evaluating the purchase of Bell, Inc. common stock that just paid a dividend of $4.60. You expect the dividend to grow at a rate of 10% for the next four years. You plan to hold the stock for four years and then sell it. You estimate the price of the company’s stock to rise to $59.37 at the end of your four-year holding period. A required rate of return of 13% will be adequate compensation for this investment. Given your assumptions, what is the current value of Bell stock? Round to the nearest $0.01 (allow a couple of pennies of rounding). answer is 53.62
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Let us suppose, a company has 1 million outstanding shares of stock, each valued at 25$. Let us also suppose that the replacement cost of its physical capital stock is 18 million $. a. Should this firm invest in more physical capital?b. Would your answer in part (a) change, if the replacement cost of its physical capital stock changes to 28 million $?
Storm plc has 5,000 shares outstanding and the stock price is £140. The company is expected to pay a dividend of £20 per share next year and thereafter the dividend is expected to grow indefinitely by 5% a year. The president, Jack Mora, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. The repurchased stock will not be entitled to the dividend. a) Discuss how the announcement affect the value of the company. b) Advise the shareholders should they choose the cash dividends, or the stock repurchase.
Please help me
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…
Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.72 per share and paid cash dividends of $2.02 per share (D0=$2.02). Grips' earnings and dividends are expected to grow at 40% per year for the next 3 years, after which they are expected to grow 9% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 10% on investments with risk characteristics similar to those of Grips?
Suppose Alex has an opportunity to buy shares of Sunnyland Snacks Company. The shares are expected to pay a dividend of $2.50 per share in one year and to sell for $92.00 per share at that time. a. Suppose the current interest rate on safe assets is 5% and Alex believes that investing in Sunnyland is not risky. How much would Alex be willing to pay today for each share of the company? b. Suppose the current interest rate on safe assets is 5%. Alex is willing to pay at most $85.90 for each share of Sunnyland today. Calculate Alex’s risk premium.
What price would you be willing to pay to purchase 1 share of this stock? (Picture )
"Finance3000" is a young start-up company. It will not pay any dividends on its stock over the next nine years because it plans to use retained earnings on expanding its business. "Finance3000" will pay a $14 per share dividend 10 years from today. After that the company will increase the dividend by 6 percent per year, in perpetuity. The required return on this stock is 12.5 percent. Calculate the value of one share of "Finance3000"'s stock. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share price

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