od Values Inc. is all-equity-financed. The total market value of the firm currently is $140,000, and there are 4,00 standing. Ignore taxes. The firm has declared a $5 per share dividend. The stock will go ex-dividend tomorrow. At what price will the st At what price will the stock sell tomorrow? Now assume that the tax rate on all dividend income is 30% and the tax rate on capital gains is zero. At what pri ay, taking account of the taxation of dividends? (Do not round intermediate calculations. Round your answer ces.) Now suppose that instead of paying a dividend, Good Values plans to repurchase $14,000 worth of stock. What ce before the repurchase? What will it be after the repurchase? oes the existence of taxes tend to favor dividends or repurchases? Answer is not complete. Stock prico
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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