Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Textbook Question
Chapter 14, Problem 14.9P
Stock dividend: Firm Columbia Paper has the following stockholders’ equity account. The firm’s common stock has a current market price of $30 per share.
| $100,000 | |
| Common stock (10,000 shares at $2 par) | $20,000 |
| Paid-in capital in excess of par | $280,000 |
| $100,000 | |
| Total stockholders’ equity | $500,000 |
- a. Show the effects on Columbia of a 5% stock dividend.
- b. Show the effects of (1) a 10% and (2) a 20% stock dividend.
- c. In light of your answers to parts a and b, discuss the effects of stock dividends on stockholders’ equity.
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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions
Assumptions
Discount rate (WACC)
Common shares outstanding
7.60%
5,029.00 million
Net nonoperating obligations (NNO) $(8,747) million
NNO is negative, which means that Cisco has net nonoperating investments
CSCO
($ millions)
DCF Model
Reported
2019
Forecast Horizon
2020 Est.
2021 Est.
2022 Est.
2023 Est.
Terminal
Period
Increase in NOA
FCFF (NOPAT - Increase in NOA)
$
1241
1303
1368
10673
11207
11767
1437 $
12354
302 ✓
Present value of horizon FCFF
9918
9679
9445 ✔
0 ×
Cum. present value of horizon FCFF $
0 ×
Present value of terminal FCFF
0 ☑
Total firm value
0 ☑
NNO
-8747 ✓
Firm equity value
$
0 ☑
Shares outstanding (millions)
5029
Stock price per share
$
40.05
Don't used hand raiting and don't used Ai solution
Don't used hand raiting and don't used Ai solution
Chapter 14 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 14.1 - What two ways can firms distribute cash to...Ch. 14.1 - Why do rapidly growing firms generally pay no...Ch. 14.1 - The dividend payout ratio equals dividends paid...Ch. 14.2 - Prob. 1FOPCh. 14.2 - Prob. 14.4RQCh. 14.2 - Prob. 14.5RQCh. 14.2 - Prob. 14.6RQCh. 14.3 - Does following the residual theory of dividends...Ch. 14.3 - Contrast the basic arguments about dividend policy...Ch. 14.4 - Prob. 14.9RQ
Ch. 14.5 - Describe a constant-payout-ratio dividend policy,...Ch. 14.6 - Why do firms issue stock dividends? Comment on the...Ch. 14.6 - Compare a stock split with a stock dividend.Ch. 14 - Prob. 1ORCh. 14 - Prob. 14.1STPCh. 14 - Prob. 14.1WUECh. 14 - Prob. 14.2WUECh. 14 - Prob. 14.3WUECh. 14 - Prob. 14.4WUECh. 14 - Prob. 14.5WUECh. 14 - Dividend payment procedures At the quarterly...Ch. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Dividend constraints The Howe Companys...Ch. 14 - Prob. 14.5PCh. 14 - Prob. 14.6PCh. 14 - Prob. 14.7PCh. 14 - Prob. 14.8PCh. 14 - Stock dividend: Firm Columbia Paper has the...Ch. 14 - Cash versus stock dividend Milwaukee Tool has the...Ch. 14 - Stock dividend: Investor Sarah Warren currently...Ch. 14 - Stock dividend: Investor Security Data Company has...Ch. 14 - Stock split: Firm Growth Industries current...Ch. 14 - Prob. 14.14PCh. 14 - Stock split versus stock dividend: Firm Mammoth...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.18PCh. 14 - Prob. 14.19P
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