The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $1 per share, and there are 20,000 shares of stockoutstanding. The market-value balance sheet for Payout is shown below.Liabilities and Equity$1, 000, 000AssetsCashFixed assets$150, 000 Equity850, 000So far, price of the share today is $50 per share and it will sell at $49 per share for tomorrow.Now suppose that Payout announces its intention to repurchase $20,000 worth of stock instead of paying out the dividend.a. What effect will the repurchase have on an investor who currently holds 200 shares and sells 4 of those shares back to thecompany in the repurchase?Total value of the positionb. What effect will the initial cash dividend payment have on the same investor?Total value of the position

Dividend is the amount of return on the shares of an entity.

Answered: The stock of Payout Corp. will go…

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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A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59. Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?
A stock is expected to pay a dividend of $3.00 per share in year 1. The stock price after one year is expected to be $80 per share. The equity cost of capital is 10%, whereas the risk-free rate is 2%. What is the current stock price? O $72.73 $75.45 $81.37 $830.00
Suppose the call money rate is 6.8 percent, and you pay a spread of 1.9 percent over that. You buy 1,300 shares at $93 per share with an initial margin of 55 percent. One year later, the stock is selling for $101 per share and you close out your position. What is your return assuming no dividends are paid
Suppose a firm is operating in 2 periods. The shareholders are expecting to receive $100,000 economic profits (per share of stock) in period 1 and $120,000 (per share of stock) in period 2. Given the required rate of return is the same in both period, which 0.05 and the real option value is $50,000. What is the current value of a share of stock? (Report your answer with 2 decimal points)
A stock just paid a dividend of $1.69. The dividend is expected to grow at 23.51% for five years and then grow at 3.84% thereafter. The required return on the stock is 12.81%. What is the value of the stock? Answer format: Currency: Round to: 2 decimal places.
A stock is expected to pay its first $740 dividend in 1 year from now. The dividend is expected to be paid annually forever and grow by 5% pa. The discount rate is 6% pa. Estimate the current stock price. The current stock price should be: a.$74,000.02b.$65,859.75c.$14,800d.$12,333.33e.$10,976.62
TSC, Inc. sells for $36 and pays an annual per share dividend of $2.10, which you expect to grow at 5 percent.What is your expected return on this stock?
Suppose the call money rate is 4.5 percent, and you pay a spread of 2.5 percent over that. You buy 700 shares of stock at $61 per share. You put up $27,755. One year later, the stock is selling for $75 per share and you close out your position. What is your return assuming a dividend of $0.90 per share is paid?
Suppose you purchase one share of the stock of Cereal Correlation Company at the beginning of year 1 for $35. At the end of year 1, you receive a $3 dividend, and buy one more share for $44. At the end of year 2, you receive total dividends of $6 (i.e., $3 for each share), and sell the shares for $50 each. The time-weighted return on your investment is? When performing the calculations, do not round any inputs or interim results until you get the final answer. Round your final answer to four places after the decimal point. The dollar-weighted return on your investment is? When performing the calculations, do not round any inputs or interim results until you get the final answer. Round your final answer to four places after the decimal point.
A stock just paid a dividend of $1.47. The dividend is expected to grow at 22.30% for five years and then grow at 4.19% thereafter. The required return on the stock is 14.06%. What is the value of the stock? Submit Answer format: Currency: Round to: 2 decimal places.
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