Rational Demiconductor has the following market-value balance sheet: Rational Demiconductor Balance Sheet (Market Values, in $ millions) $ 12 $ 0.0 Debt 21 $33 Surplus cash Fixed assets and net working capital 33 $ 33 Equity market capitalization (1 million shares at $33 per share) Assume that Rational wins a lawsuit and is paid $3 million in cash. Its market capitalization rises by that amount. It decides to pay out $15 per share instead of $1 per share. a. New stock price b. New stock price a. What happens to Rational's stock price if the payout comes as a cash dividend? b. What happens to Rational's stock price if the payout comes as a share repurchase? Note: Round your intermediate calculations to the nearest whole number.
Rational Demiconductor has the following market-value balance sheet: Rational Demiconductor Balance Sheet (Market Values, in $ millions) $ 12 $ 0.0 Debt 21 $33 Surplus cash Fixed assets and net working capital 33 $ 33 Equity market capitalization (1 million shares at $33 per share) Assume that Rational wins a lawsuit and is paid $3 million in cash. Its market capitalization rises by that amount. It decides to pay out $15 per share instead of $1 per share. a. New stock price b. New stock price a. What happens to Rational's stock price if the payout comes as a cash dividend? b. What happens to Rational's stock price if the payout comes as a share repurchase? Note: Round your intermediate calculations to the nearest whole number.
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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A 42.
Transcribed Image Text:Rational Demiconductor has the following market-value balance sheet:
Surplus cash
Fixed assets and net working capital
Rational Demiconductor
Balance Sheet
(Market Values, in $ millions)
$ 12
$ 0.0
Debt
21
33
$ 33
$33
Equity market capitalization (1 million shares at $33 per
share)
Assume that Rational wins a lawsuit and is paid $3 million in cash. Its market capitalization rises by that amount. It decides to pay out
$15 per share instead of $1 per share.
a. New stock price
b. New stock price
a. What happens to Rational's stock price if the payout comes as a cash dividend?
b. What happens to Rational's stock price if the payout comes as a share repurchase?
Note: Round your intermediate calculations to the nearest whole number.
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