Answered: dividends per share if the firm used…

dividends per share if the firm used 20% debt financing and the firm followed a strict residual dividend policy? $3.65 per share $2.92 per share $1.05 per share $3.25 per share

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A firm has a market value equal to its book value. Currently, the firm has excess cash of $1,100,…

A: FEEL FREE TO ASK FOR CLARIFICATIONS

Q: Which of the following statements about a trial balance is correct? Select one: All of these…

A: The objective of the question is to identify the correct statement about a trial balance from the…

Q: Consider a firm with an EBIT of $10,500,000. The firm finances its assets with $50,000,000 debt…

A: EPS It is helpful in indicating how much money the entity will make for every share of the stock.

Q: 2. Major Bagel is an all-equity firm. It has 20 million outstanding shares currently priced at $25…

A: The Weighted Average Cost of Capital (WACC) is a vital financial metric that shows the average cost…

Q: A firm has 8,000,000 ordinary shares outstanding. The current market price is `25 and the book value…

A: First we need to calculate Return on Equity (ROE) by using equation below.ROE = EPS/ Book…

Q: Consider a firm with an EBITDA of $16,800,000 and an EBIT of $12,400,000. The firm finances its…

A: EBIT = $12,400,000 Numberof shares outstanding = 11,900,000 Debt = $53,800,000Interest rate =…

Q: Free cash flow to firm for Adams Corporation is currently $300,345,800.00 but is expected to grow by…

A: FCF0 = $300,345,800 Growth rate (g) = 4.75% Cost of capital (r) = 10.875%

Q: A firm is solely financed by equity with market value of $50,000 and cost of equity of 10%. It…

A: Under the MM proposition without taxes, the value and the WACC of a firm are not affected by the…

Q: Consider a firm with an EBITDA of $14,000,000 and an EBIT of $11,000,000. The firm finances its…

A: EPS is crucial for investors and analysts because it provides insight into the profitability of a…

Q: 1. Rexton Oil is an all-equity firm with 20 million of shares outstanding. Rexton currently has a…

A: Question 1: ExpansionInitial Valuation:V₀ = C / r = $100M / 0.08 = $1,250MPost-Expansion…

Q: Palo Alto Enterprises has £300,000 in cash. They wish to invest the money in Treasury bills at 8%…

A: Solution:- In perfect capital markets, where there are no transaction costs and taxes involved, the…

Q: Suppose that a firm has 700,000 outstanding shares, each valued at Php 141. Suppose further that the…

A: Total number of shares outstanding is 700,000 Value of share is Php 141 Replacement cost of physical…

Q: Lance Inc.'s free cash flow was just $2.00 million. If the expected long-run growth r 6.0%, if the…

A: WACC is the cost of capital and is the weighted cost of equity and weighted cost of debt and is…

Q: Does accounting dilution and/or market value dilution take place? Why?

A: Accounting DilutionAccounting dilution refers to a decrease in earnings per share (EPS) as a result…

Q: A firm's stockholders expect a 12% rate of return, and there is $20M in common stock and retained…

A: The Weighted average cost of capital(WACC) refers to the method in which each category of capital is…

Q: Assume a firm is planning to raise €15,000,000 capital from the market. The firm has a long-term…

A: Under residual dividends model, dividends is- = Net Income - (target equity ratio* total capital…

Q: what is the intrinsic stock price?

A: The intrinsic stock price estimates the underlying value of a stock based on elements like earnings,…

Q: Free cash flow to firm for JC de Vera Corporation is currently $300,345.800.00 but is expected to…

A: solution given Free cash flow 300345800 Growth rate 4.75% Cost of capital 10.875%…

Q: 3,11 nouit methodology, what is the value of the equity claim?

A: The formula used is correct: Debt capital = Total capital required * (Debt-to-equity ratio / (1 +…

Q: A firm is expected to have free cash flows of $50 million this year (FCF1=$50m). Free cash flows are…

A: The free cash flow valuation method is one of the techniques that entities employ to value their…

Q: million shares.a. What is the market value of the firm prior to the recap? What is the market value…

A: The market value of the firm is comparable to the overall cost of the business. It is based on the…

Q: The firm's cost of debt is 9 percent, and the cost of retained earnings is 15 percent. However, if…

A: The cost of capital is the minimum expected rate of return of the investors or suppliers of funds to…

Q: If the firm were all equity financed and the firm followed a strict residual dividend policy, how…

A: When a company follows strict residual dividend policy then it means that company will calculate…

Q: Consider a firm with an EBITDA of $14,200,000 and an EBIT of $11,100,000. The firm finances its…

A: EPS is crucial for investors and analysts because it provides insight into the profitability of a…

Q: Using the above data, if there are 3 M shares outstanding, what is the value per share?

A: The value of cash available to a corporation after covering the costs of doing business is measured…

Q: Estimate the cost of capital for company A. The company has 4 million shares and 125 000 bonds…

Q: Sunland Inc.’s common shares currently sell for $35 each. The firm’s management believes that its…

A: The cost of equity is the return an investor requires by investing in the equity shares of a…

Q: boost its stock price. The company currently has 20 million shares outstanding with a market price…

A: A company which has leverage means it is using debt in the capital structure and the total earning…

Q: (Dividend policy and the issue of new shares of common stock) Your firm needs to raise $10.6 million…

A: Common Stock: It is a financial instrument representing ownership in the firm. The value of the…

Q: 7. An all-equity firm has 100 million shares outstanding and $100 million in cash. The firm expects…

A: Share price refers to the amount that is paid by the investor for purchasing one share from the…

Q: The firm is currently an all-equity firm with assets worth $250 million and 100 million shares…

A: Value of All equity Firm = $250 million Number of shares = 100 million Tax rate = 20% Debt = $100…

Q: Assume ABC shares have a market capitalization of $50 million. The company is expected to pay a…

A: WACC refers to weighted average cost of capital. It is the rate that a firm needs to pay (on an…

Q: Suchart Plastics Inc. has the following data. If it follows the residual dividend model, what is its…

A: Capital Budget = $12,500 Debt = 40% Net income = $11,500

Q: A firm just paid a common dividend of $0.30 and expects a 10% growth in dividends. Shareholders’…

A: We need to use constant growth model which assumes that dividend will grow at constant rate. This is…

Q: Costly Corporation is considering using equity financing. Currently, the firm's stock is selling for…

A: Stock price = $ 47 Recent dividend = $ 2 Growth rate = 5%

Q: Consider a firm with an EBIT of $868,000. The firm finances its assets with $2,680,000 debt (costing…

A: Step 1 EPS before = Net income / number of sharesNet Income=(EBIT- Interest)*(1- Tax Rate)Debt…

Q: Free cash flow to firm for JC de Vera Corporation is currently $300,345,800.00 but is expected to…

A: The question is related to Value of Business. The detaiks are given. The question will be solved by…

Q: Free cash flow to firm for JC de Vera Corporation is currently $300,345,800.00 but is expected to…

A: The question is related to Value of Business. The detaiks are given. The question will be solved by…

Q: A company had free cash flows of $788 million last year. Free cash flows are expected to grow at…

A: Free cash flow method is used to calculate the profitability of the firm by valuating overall health…

Q: The most recent free cash flows of a firm were $15 million. They are expected to grow at a constant…

A: Free cash flow model is valuation model used to value the firm and value from equity.

Q: Consider a firm with an EBIT of $866,000. The firm finances its assets with $2,660,000 debt (costing…

A: EPS refers to the Earning per share , it is the earnign available to each and every individual unit…

Q: Based on a discounted free cash flow method, you have estimated the value of a company to be $720…

A: Given information:company's total worth is $720 milliondebt outstanding is $145 millionequity is the…

Q: Lance Inc.'s free cash flow was just $3.00 million. If the expected long-run growth rate for this…

Q: A firm has a bank loan with a 10% interest rate. The firm also has in issue 8% preference shares…

A: Cost of Debt = cd = 10%Cost of Preferred Stock= cp = 8%Cost of Equity = ce = 18%Tax Rate = t =…

Question

A firm has cash flow from operations of $138 million and needs $125 million for investment purposes, leaving $13 million of free cash flow. Assume the firm has 13 million shares outstanding and its shares are presently trading at $41 per share. How much would it pay out in dividends per share if the firm used 20% debt financing and the firm followed a strict residual dividend policy?

$3.65 per share

$2.92 per share

$1.05 per share

$3.25 per share

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

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 $?
Your firm has $2,100,000 in stock assets with a duration of 12 and $900,000 in cash with a duration of 0. Your firm has issued debt with a present value of $1,700,000 and a duration of 16. The yield curve is flat at 4.35%. a) What is the value of equity? b) What is the duration of equity?
10
Consider a firm with an EBITDA of $1,100,000 and an EBIT of $1,000,000. The firm finances its assets with $4,640,000 debt (costing 8.4 percent, all of which is tax deductible) and 214,000 shares of stock selling at $12 per share. To reduce risk associated with this financial leverage, the firm is considering reducing its debt by $2,640,000 by selling additional shares of stock. The firm’s tax rate is 21 percent. The change in capital structure will have no effect on the operations of the firm. Thus, EBIT will remain at $1,000,000. Calculate the EPS before and after the change in capital structure and indicate changes in EPS.
A firm is currently an all equity firm that has 510,000 shares of stock outstanding with a market price of $53.60 a share. The current cost of equity is 10.5 percent and the tax rate is 25 percent. The firm is considering adding $7.10million of debt with a coupon rate of 6 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity ?
i need the answer quickly
Currently, a firm has $400,000 in debt outstanding and 4,000,000 shares outstanding. The firm is considering changing to an all-equity capital structure, which would result in 5,000,000 shares outstanding. What is the interest rate on the firm's debt if the break-even EBIT is $150,00O?
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?
9
ACME, Inc. forecasts that it will have the free cash flows shown below. The free cash flows are expected to grow by 4% per year after year 3. Year 1 23 FCF (S million) 20 48 54 The weighted average cost of capital is 11%. The firm has $40 million of debt and 10 million shares outstanding. What is a good estimate of ACME's share price? O $55.25 $27.30 $60.70 $38.55
A firm has 5 million shares outstanding with a market price of $35 per share. The firm has $10 million in extra cash (short-term investments) that it plans to use in a stock repurchase; the firm has no other financial investments or any debt. What is the firm's value of operations after the repurchase? Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places. $ million How many shares will remain after the repurchase? Round your answer to the nearest whole number. shares