WNB LLC has projected a net income of $1 million USD in 2020. HHQ1 pays $100,000 total dividends to its 100,000 common shareholders outstanding @ the end of 2019 (Jan 01: 80,000 shares outstanding; July 01: 20,000 new shares were issued). The company also has 10,000 convertible preferred stocks ($5 dividend per P.S) and 2000 convertible bonds (10% coupon rate @$1000 par value). In 2020, 80% of the preferred stock holders may convert to common stocks (3 Common shares per preferred share). Also, 100% bondholders are allowed to convert to 2 common shares per bond. Tax rate 40%. Calculate both the basic and diluted EPS for WNB
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
WNB LLC has projected a net income of $1 million USD in 2020. HHQ1 pays $100,000 total dividends to its
100,000 common shareholders outstanding @ the end of 2019 (Jan 01: 80,000 shares outstanding; July 01:
20,000 new shares were issued). The company also has 10,000 convertible preferred stocks ($5 dividend per
P.S) and 2000 convertible bonds (10% coupon rate @$1000 par value). In 2020, 80% of the preferred stock
holders may convert to common stocks (3 Common
allowed to convert to 2 common shares per bond. Tax rate 40%. Calculate both the basic and diluted EPS for
WNB
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