Shatin Intl. has 10.5 million shares, an equity cost of capital of 12.5% and is expected to pay a total dividend of $20.4 million each year forever. It announces that it will increase its payout to shareholders. Instead of increasing its dividend, it will keep it constant and will start repurchasing $9.7 million of stock each year as well. What is your estimate of Shatin's stock price after this announcement?

Shatin Intl. has 10.5 million shares, an equity cost of capital of 12.5% and is expected to pay a total dividend of $20.4 million each year forever. It announces that it will increase its payout to shareholders. Instead of increasing its dividend, it will keep it constant and will start repurchasing $9.7 million of stock each year as well. What is your estimate of Shatin's stock price after this announcement?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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