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In this section we examine three theories of ivestor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase.

In this section we examine three theories of ivestor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase.

Essentials Of Investments
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
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1. In this section we examine three theories of investor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase. 2. In the working capital management, we know about cash conversion cycle model. For problem if average inventories are $3 million and sales are $11 million. If receivables are S 657.535 and sales are $ 11 million. Then, if its cost of goods sold are $9 million per year and if its accounts payable average S 657.535. What is the length of the cash conversion sicle? 3. The ELGRAJO Corporation has a capital structure as follow (consider is optimal): 25% Debt, 15% Preference Stock, and 60% Common Stock. Totally 100%. Expected net profit is 17.142.860,- this rear. 30% Dividend payout ratio, tax is 40% and investor expecting an income and growth dividend is 9% (g) on the future. Last year, company did pay dividend (Do) as 3.600 pershare and in this time sold 60.000 pershare. The free risk Interest rate is 14% (km). The beta stocks of the corporation as 1.51 (bi). This requirements for the new security offering. Common stock of flotation cost as 10% and Preferrent stock can be sold to public as 100.000,- pershare, With dividend as 11.000,- a flotation cost as 5.000,- pershare. The debt can be sold and interest payment is 12% (Kd) a. Calculate the component of cost of debt, cost of preferred stock, cost of retain earnings and cost of new common stock
Transcribed Image Text:1. In this section we examine three theories of investor preference: The dividend irrelevance theory. The "bird in the hand" theory, the tax preference theory, which theory is the best? What is the different of stock dividends, stock splits, and stock repurchase. 2. In the working capital management, we know about cash conversion cycle model. For problem if average inventories are $3 million and sales are $11 million. If receivables are S 657.535 and sales are $ 11 million. Then, if its cost of goods sold are $9 million per year and if its accounts payable average S 657.535. What is the length of the cash conversion sicle? 3. The ELGRAJO Corporation has a capital structure as follow (consider is optimal): 25% Debt, 15% Preference Stock, and 60% Common Stock. Totally 100%. Expected net profit is 17.142.860,- this rear. 30% Dividend payout ratio, tax is 40% and investor expecting an income and growth dividend is 9% (g) on the future. Last year, company did pay dividend (Do) as 3.600 pershare and in this time sold 60.000 pershare. The free risk Interest rate is 14% (km). The beta stocks of the corporation as 1.51 (bi). This requirements for the new security offering. Common stock of flotation cost as 10% and Preferrent stock can be sold to public as 100.000,- pershare, With dividend as 11.000,- a flotation cost as 5.000,- pershare. The debt can be sold and interest payment is 12% (Kd) a. Calculate the component of cost of debt, cost of preferred stock, cost of retain earnings and cost of new common stock
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