If Tolbotics Inc. declares a 2-for-1 stock split, the price of the company's stock after the split, assuming that the total value of the firm's stock remainsthe same after the split, will beHackworth Hardware Company is one of Tolbotics's leading competitors. Hackworth Hardware Company's market intelligence research team sharesTolbotics's plans of announcing a stock split, influencing the distribution policy makers. Consequently, executives at Hackworth decide to offer stockdividends to its shareholders.A stock dividend is another way of keeping the stock price from going too high. Hackworth currently has 1,100,000 shares of common stockoutstanding.If the firm pays a 5% stock dividend, how many shares will the firm issue to its existing shareholders?52,250 shares49,500 shares55,000 shares41,250 shares Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases.Consider the following case:Tolbotics Inc. currently has 20,000 shares of common stock outstanding. Its management believes that its current stock price of $90 per share is toohigh. The company is planning to conduct stock splits in the ratio of 2 for 1 as described in the animation.

Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases. Consider the following case: Tolbotics Inc. currently has 20,000 shares of common stock outstanding. Its management believes that its current stock price of $90 per share is too high. The company is planning to conduct stock splits in the ratio of 2 for 1 as described in the animation.

Companies sometimes consider stock splits to bring down the price so that the stock attracts more purchases. Consider the following case: Tolbotics Inc. currently has 20,000 shares of common stock outstanding. Its management believes that its current stock price of $90 per share is too high. The company is planning to conduct stock splits in the ratio of 2 for 1 as described in the animation.

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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In the above example, suppose the firm had paid $80 per share when buying back shares with its $100 in cash. (Assume that the firm can buy back fractional shares.) In this and the following two questions, fill in the blanks in the table below. Cash Other assets Total market value of stock Shares Share price Do not use $ sign. Answer to nearest whole number. The missing value for a is: Before buyback $100 $400 $500 10 $50 After buyback 0 $400 a b C
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After learning how to value a stock in his Corporate Finance class, Mark Stark decided to put his knowledge into practice and use the constant growth rate model to value El Tomate Feliz Co. He found that the company was severely undervalued. The stock was trading at $50 per share, but he valued it at $120 per share. Mark complained: “I thought that El Tomate Feliz was a steal and bought as many shares as I could, but the price didn’t go up. I have waited a year, and the price has not changed that much.” Lower necessary rate of return - Mark would have estimated his cost of equity or required rate of return at lower levels, resulting in better intrinsic values as a result of the lower discount rate. What does this mean,” …Mark would have estimated his cost of equity or required rate of return at lower levels"
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