HeDividend constraints A firm has $750,000 in paid-in capital, retained earnings of $38,000 (including the current year's earnings), and 25,000 shares of common stockoutstanding. In the current year, it has $28,000 of earnings available for the common stockholders.ionsa. What is the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.)b. What effect would a cash dividend of $0.96 per share have on the firm's balance sheet entries?c. If the firm cannot raise any new funds from external sources, what do you consider the key constraint with respect to the magnitude of the firm's dividend payments?a If legal capital is assumed to include all paid-in capital, the most the firm can pay in cash dividends to each common stockholder is $(Round to the nearest cent.)Eriter your answer im the ainswer box and then click Check Answer.partsremainingClear AllCheck Answer10:38pe here to search5/8/2

The maximum dividend that can be paid is equal to the retained earnings of the company.

constraints A firm has $750,000 in paid-in capital, retained earnings of $38,000 (including the current year's earnings), and 25,000 shares of common st g. In the current year, it has $28,000 of earnings available for the common stockholders. s the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.) effect would a cash dividend of $0.96 per share have on the firm's balance sheet entries? m cannot raise any new funds from external sources, what do you consider the key constraint with respect to the magnitude of the firm's dividend paymen capital is assumed to include all paid-in capital, the most the firm can pay in cash dividends to each common stockholder is $ (Round to the nearest o

constraints A firm has $750,000 in paid-in capital, retained earnings of $38,000 (including the current year's earnings), and 25,000 shares of common st g. In the current year, it has $28,000 of earnings available for the common stockholders. s the most the firm can pay in cash dividends to each common stockholder? (Assume that legal capital includes all paid-in capital.) effect would a cash dividend of $0.96 per share have on the firm's balance sheet entries? m cannot raise any new funds from external sources, what do you consider the key constraint with respect to the magnitude of the firm's dividend paymen capital is assumed to include all paid-in capital, the most the firm can pay in cash dividends to each common stockholder is $ (Round to the nearest o

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
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
S Suppose Wacken, Limited just issued a dividend of $2.61 per share on its common stock. The company paid dividends of $2.11, $2.18, $2.35, and $2.45 per share in the last four years. If the stock currently sells for $80, what is your best estimate of the company's cost of equity capital using arithmetic and geometric growth rates? Note: Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16. Cost of equity using arithmetic growth rate Cost of equity using geometric growth rate % %
Vijay
Assuming the following: 1. 4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of Depreciation 4. PE multiple of 16x 5. $1.75 quarterly dividend which is expected to grow by 4.23% 6. Book value of $115mm 7. Current share price of $125 8. Tax rate of 25% 9. EBITDA Multiple of 7x. What is the market value of equity? A form of the correct answer would be $53mm.
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%
Estimate a reasonable intrinsic stock price per share as of 01/01/2023 for private Manufacturing Company A given the information in the table below. Also assume that the company has a 10.50% weighted average cost of capital, $5,542 million excess cash holdings, $25,000 million market value of debt, 1,000 million shares outstanding, and 2.0% FCF terminal growth rate starting at the end of 2027. Assume that the cash flows depicted in the table below occur at the end of each year (i.e., -600 is FCF1 and 16,500 is FCF5).
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?
Capital structure of the ABC PJSC is as follows: Equity share capital market value $ 200 million, dividend $ 4 , market price per share $88, dividend growth 4%. Bond $ 300 million, Yield to maturity 4% , tax rate 20% Calculate weighted average cost of capital.
What effect would the calculation performed have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will increasing its dividend per share by 1.75 support or inhibit that goal? Be sure to justify reasoning.

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