Suppose that Wayne Industries is an equity only firm and has $76 million in excess cash. The firm expects to generate additional free cash flows of $106 million per year forever and will distribute these future free cash flows as regular dividends to its shareholders. Assume that the company's unlevered cost of capital is 11% and it has 12 million shares outstanding. If the company decides to use all of its excess cash to repurchase shares, what will be the amount of its regular annual dividends in the future?

Suppose that Wayne Industries is an equity only firm and has $76 million in excess cash. The firm expects to generate additional free cash flows of $106 million per year forever and will distribute these future free cash flows as regular dividends to its shareholders. Assume that the company's unlevered cost of capital is 11% and it has 12 million shares outstanding. If the company decides to use all of its excess cash to repurchase shares, what will be the amount of its regular annual dividends in the future?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 6MC

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