QUESTIONS 12-16 UsRToys' most recent dividend was $2.11 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. NOTE: Use this information to answer questions 12 thru 16. Do not enter dollar or percent signs in your answers. Round off all of your numerical responses in questions 12 thru 16 to two (2) decimal points.
QUESTIONS 12-16 UsRToys' most recent dividend was $2.11 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. NOTE: Use this information to answer questions 12 thru 16. Do not enter dollar or percent signs in your answers. Round off all of your numerical responses in questions 12 thru 16 to two (2) decimal points.
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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Transcribed Image Text:Question 12
If the firm does nothing (which will leave the key financial variables unchanged), what will be its share price? (Round to two decimal points, and do not
include the 'S' sign in your response)
Question 13
If the firm invests in a new machine that will increase the dividend growth rate to 7% and lower the required return to 14%, what will be its share
price? (Round to two decimal points, and do not include the 'S' sign in your response)
Question 14
If the firm eliminates an unprofitable product line that will increase the dividend growth rate to 9% and raise the required return to 16%, what will be
its share price? (Round to two decimal points, and do not include the 'S sign in your response)
If the firm merges with another firm that will reduce the growth rate to 3% and raise the required return to 17%, what will be its share price? (Round to
two decimal points, and do not include the 'S' sign in your response)
Question 16
If the firm acquires a subsidiary operation from another manufacturer that will increase the dividend growth rate to 9% and increase the required
return to 16%, what will be its share price? (Round to two decimal points, and do not include the $ sign in your response)
Transcribed Image Text:QUESTIONS 12-16
USRToys' most recent dividend was $2.11 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety
of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following
proposed actions.
NOTE: Use this information to answer questions 12 thru 16. Do not enter dollar or percent signs in your answers. Round off all of your numerical
responses in questions 12 thru 16 to two (2) decimal points.
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