Stock Splits and Stock Dividends. Bermuda Triangle Corporation (BTC)currently has 500,000 shares of stock outstanding that sell for $83 per share.Assuming no market imperfections or tax effects exist, what will the share pricebe after:a. BTC has a five-for-three stock split?b. BTC has a 15 percent stock dividend?BTC has a 42.5 percent stock dividend?d. BTC has a four-for-seven reverse stock split?C.e.Determine the new number of shares outstanding in parts (a) through (d).

A share price is a minimum price that must be paid to acquire a share from the market. It is…

Answered: Stock Splits and Stock Dividends. Bermu…

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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Q: Corn, Inc., has an odd dividend policy. The company has just paid a dividend of $6 per share and has announced that it will increase the dividend by $2 per share for each of the next four years, and then never pay another dividend. suppose you require an 11 percent return on thecompany’s stock.Required:a) how much will you pay for a share today?b) Is the value of this stock dependent upon how long you plan to hold it? would this affect the value of the stock today?c) What happens if a company has a constant growth g that exceeds its cost of capital ks?Will many stocks have expected g> ks in the short run? In the long run (that is, forever)?
Automotive Supplies Inc’s Stock trades at $50 a share. The company is contemplating a 4-for-3 stock split. Assuming that the stock split will have no effect on the market value of its equity, what will be the company’s stock price following the stock split? Select one: a. $50.00 b. $80.00 c. $75.00 d. $37.50
Need the answer of the following question
Boulangerie de Patisserie stock is currently trading for €48 per share and is planning to pay a €4 special dividend. Suppose that capital gains are taxed at a 20% and dividends are taxed at 35%. What is the company's expected ex-dividend stock price?
Labrador technologies Inc. plans to become public soon. The current owners would like to know the value of each share of common equity so they price their shares correctly for potential investors. The WACC for this firm is 10.46% and there are 63,314 common shares outstanding. The firm has outstanding debt with a market value of $2,840,088 and has no preferred equity. Use the DCF valuation model based on the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 2.8% rate after Year 5. Rounding to the nearest penny, what is the value of each share of common stock? Period Free Cash Flow Year 1 $1,004,648 Year 2 $1,442,144 Year 3 $1,311,927 Year 4 $2,319,814 Year 5 $2,598,958
Ewing Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000 would be spent. Current earnings are $3 per share, and the stock currently sells for $50 per share. There are 5,000 shares outstanding. Ignore taxes and other market imperfections (e.g. transaction cost) in answering the questions. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. b) What will be the effect on Ewing’s EPS and PE ratio under the two different scenarios?
(b) The company is also considering offering additional common shares in the market. However Insignia is concerned about whether its stock is fairly valued on the market. As such, its Finance Manager has undertaken an exercise to determine the current price of its common shares based on the following anticipated dividend payout structure: V Insignia's last dividend paid was $4.20. V The company intends to increase the dividend by 10%, 15% and 20% respectively over the next three (3) years. V Thereafter, the company is expected to increase dividends by an annual rate of 2%. The company continues to assume a required return of 12%. Required: Given the above, what should be the current price of Insignia's common shares?
Anle Corporation has a current stock price of $19.49 and is expected to pay a dividend of $1.25 in one year. Its expected stock price right after paying that dividend is $21.26. a. What is Anle's equity cost of capital? b. How much of Anle's equity cost of capital is expected to be satisfied by dividend yield and how much by capital gain?
What effect would the calculation performed have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will increasing its dividend per share by 1.75 support or inhibit that goal? Be sure to justify reasoning.
The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend Expected Capital Gain A $0 $10 B 5 5 C 10 0 Required: a. If each stock is priced at $110, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Req A Req B If each stock is priced at $110, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective…
Wyatt Oil pays a regular dividend of $2.0 per share. Typically, the stock price drops by $2.20 per share when the stock goes ex-dividend. Suppose the capital gains tax rate is 24%, but investors pay different tax rates on dividends. Absent transactions cost, the highest dividend tax rate of an investor who could gain from trading to capture the dividend is closest to (%) (2 decimal places):
A company wants to raise $400 million in a new stock issue. Its investment banker indicates that the sale of new stock will require 5 percent underpricing and a 4 percent spread (Hint: the underpricing is 5 percent of the current stock price, and the spread is 4 percent of the issue price) a Assuming the company's stock price does not change from its current price of $65 per share, what would be the issue price to the public after underpricing? How many shares would the company need to sell? Note: Round intermediate calculations to 2 decimal places. Round your answers to 2 decimal places. Enter "Number of shares" answer in millions. 4 Issue price Number of shares million b. How much money will the investment banking syndicate earn on the sale? Note: Round intermediate calculations to 2 decimal places. Enter your answer in millions rounded to 2 decimal places. Investment bankers' revenue million i

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