Fundamentals of Financial Management (MindTap Course List)
15th Edition
ISBN: 9781337671002
Author: Brigham
Publisher: Cengage
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Chapter 15, Problem 5TCL
Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions.
In this chapter's opening vignette, we discussed Apple's decision to establish a dividend payout policy in 2012 and its subsequent decisions to increase quarterly dividends and raise its repurchase program to $175 billion. Let's find out what has happened to Apple's (AAPL) dividend policy since the time of its original announcement. We can address this issue by relying on data provided on internet financial websites such as Yahoo! Finance, Morningstar.com, Google Finance, and MSN Money (www.msn.com/en-us/
5. Investors are more concerned with future dividends than historical dividends. Look at analysts' earnings estimates for the next year and the 5-year annual growth estimates. On the basis of these data, what would you expect Apple’s payout policy to be over the next 5 years? (Your answer will only be a guess based on current data.)
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Chapter 15 Solutions
Fundamentals of Financial Management (MindTap Course List)
Ch. 15 - Discuss the pros and cons of having the directors...Ch. 15 - Prob. 2QCh. 15 - Would it ever be rational for a form to barrow...Ch. 15 - Modigliani and Miller (MM), on the one hand, and...Ch. 15 - How would each of the following changes tend to...Ch. 15 - One position expressed in the financial literature...Ch. 15 - Prob. 7QCh. 15 - What the difference between a stock dividend and a...Ch. 15 - Most firms like to have their stock selling at a...Ch. 15 - Prob. 10Q
Ch. 15 - What is meant by catering theory, and how might it...Ch. 15 - RESIDUAL DIVIDEND MODEL Altamonte...Ch. 15 - Prob. 2PCh. 15 - STOCK REPURCHASES Gamma Industries has net income...Ch. 15 - STOCK SPLIT After a 5-for-l stock split, Tyler...Ch. 15 - EXTERNAL EQUITY FINANCING Coastal Carolina Heating...Ch. 15 - RESIDUAL DIVIDEND MODEL Walsh Company is...Ch. 15 - DIVIDENDS Brooks Sporting Inc. is prepared to...Ch. 15 - ALTERNATIVE DIVIDEND POLICIES Rubenstein Bros....Ch. 15 - ALTERNATIVE DIVIDEND POLICIES In 2017, Keenan...Ch. 15 - RESIDUAL DIVIDEND MODEL Buena Terra Corporation is...Ch. 15 - Prob. 11ICCh. 15 - Prob. 1TCLCh. 15 - Use online resources to work on this chapter's...Ch. 15 - Prob. 3TCLCh. 15 - Prob. 4TCLCh. 15 - Use online resources to work on this chapter's...Ch. 15 - Use online resources to work on this chapter's...
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- Eccles Inc., a zero-growth firm, has an expected EBIT of $100.000 and a corporate tax rate of 30%. Eccles uses $500,000 of 12.0% debt, and the cost of equity to an unlevered firm in the same risk class is 16.0%. What is the firm's cost of equity according to MM with corporate taxes? Ο 32.0% Ο 25.9% Ο 21.0% Ο 28.8% Ο 23.3%arrow_forwardP&L Corporation wants to sell some 20-year, annual interest, $1,000 par value bonds. Its stock sells for $42 per share, and each bond would have 75 warrants attached to it each exercisable into one share of stock at an exercise price of $47. The firm's straight bonds yield 10%. Each warrant is expected to have a market value of $2.00 given that the stock sells for $42. What coupon interest rate must the company set on the bonds in order to sell the bonds with-warrants at par? a. 9.54% b. 8.65% c. 9.08% d. 8.24% e. 83%arrow_forwardPotter & Lopez Inc. just sold a bond with 50 warrants attached. The bonds have a 20-year maturity and an annual coupon of 12%, and they were issued at their $1,000 par value. The current yield on similar straight bonds is 15%. What is the implied value of each warrant? Ο $4.35 O $3.76 O $4.56 O $4.14 O $3.94arrow_forward
- If a firm adheres strictly to the residual dividend policy, the issuance of new common stock would suggest that The dividend payout ratio is decreasing. The dividend payout ratio has remained constant. The dollar amount of investments has decreased. No dividends were paid during the year. the dividend payout ratio is increasing.arrow_forwardq6) Which of the following statements is CORRECT? If Congress increases taxes on capital gains but leaves tax rates on dividends unchanged, this will motivate companies to increase stock repurchases. The clientele effect explains why firms change their dividend policies so often.. One advantage of the residual dividend policy is that it helps corporations to develop a specific and well-identified dividend clientele. If a firm splits its stock 2-for-1, then its stock price will be doubled. If a firm follows the residual dividend policy, then a sudden increase in the number of profitable projects is likely to reduce the firm's dividend payout.arrow_forwardAmold Rossiter is a 40-year-old employee of the Barrington Company who will retire at age 60 and expects to live to age 75. The firm has promised a retirement income of $20.000 at the end of each year following retirement until death. The firm's pension fund is expected to earn 7 percent annually on its assets and the firm uses 7% to discount pension benefits. What is Barrington's annual pension contribution to the nearest dollar for Mr. Rossiter? (Assume certainty and end-of-year cash flows. a. $3,642 b.$4,443 c. $4,967 d.$5,491 e.$2,756arrow_forward
- Morales Publishing's tax rate is 40%, its beta is 1.10, and it uses no debt. However, the CFO is considering moving to a capital structure with 30% debt and 70% equity. If the risk free rate is 5.0% and the market risk premium is 6.0%, by how much would the capital structure shift change the firm's cost of equity? Ο 1.53% Ο 2.05% Ο 1.70% Ο 1.87% O 2.26%arrow_forwardThe common stock of Southern Airlines currently sells for $33, and its 8% convertible debentures (issued at par, or $1,000) sell for $850. Each debenture can be converted into 25 shares of common stock at any time before 2025. What is the conversion value of the bond? a. $825.00 b.$866.25 c. $744.56 d. $783.75 e. $707.33arrow_forwardBailey and Sons has a levered beta of 1.10, its capital structure consists of 40% debt and 60% equity, and its tax rate is 40%. What would Bailey's beta be if it used no debt, i.e., what is its unlevered beta? a. 0.79 b. 0.71 c. 0.67 d. 0.64 e. 0.75arrow_forward
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