PRIN.OF CORP.FINANCE-CONNECT ACCESS
PRIN.OF CORP.FINANCE-CONNECT ACCESS
13th Edition
ISBN: 2810023360757
Author: BREALEY
Publisher: MCG
bartleby

Concept explainers

bartleby

Videos

Textbook Question
Book Icon
Chapter 16, Problem 1PS

Dividend payments* In 2017, Entergy paid a regular quarterly dividend of $.89 per share.

  1. a. Match each of the following dates.
(AI) Friday, October 27 (BI) Record date
(A2) Tuesday, November 7 (B2) Payment date
(A3) Wednesday, November 8 (B3) Ex-dividend date
(A4) Thursday, November 9 (B4) Last with-dividend date
(A5) Friday, December 1 (B5) Declaration date
  1. b. On one of these dates, the stock price fell by about $.89. Which date? Why?
  2. c. Entergy’s stock price in November 2017 was about $86. What was the dividend yield?
  3. d. Entergy’s forecasted earnings per share for 2017 were about $6.90. What was the payout ratio?
  4. e. Suppose that Entergy paid a 10% stock dividend. What would happen to the stock price?

a)

Expert Solution
Check Mark
Summary Introduction

To determine: The appropriate events in respective dates.

Explanation of Solution

Following are the appropriates matched with respective events:

DateEvent
Friday, October 27Declaration date
Tuesday, November 7Last with-dividend date
Wednesday, November 8Ex-dividend date
Thursday, November 9Record date
Friday, December 1Payment date

b)

Expert Solution
Check Mark
Summary Introduction

To determine: The date at which the stock price is fell by $0.89 and the reason.

Explanation of Solution

The date is on November 8th and it was the ex-dividend date, the fall in price due to the buyers of the stock on the ex-dividend date are not included in the company’s books prior to the record date and therefore they are not entitled to get the dividend and the price is fall by approximately the dividend amount.

c)

Expert Solution
Check Mark
Summary Introduction

To determine: The dividend yield of the company E.

Dividend yield is the ratio between a firm’s yearly dividend to its share price and it is denoted as percentage.

Explanation of Solution

Dividend yield = Annual dividendStock price=($0.89×4)$86=$3.56$86=0.0414or 4.14%.

Therefore, the dividend yield of company E is 4.14%.

d)

Expert Solution
Check Mark
Summary Introduction

To determine: The payout ratio of the company E.

Payout ratio is the ratio which shows the amount of dividend that a firm gives out to its shareholders from its current earnings.

Explanation of Solution

Payout ratio = Annual dividendAnnual earnings=($0.89×4)$6.90=$3.56$6.90=0.516or 51.6%.

Therefore, the payout ratio of the company E is 51.16%.

e)

Expert Solution
Check Mark
Summary Introduction

To determine: The impact on stock price if the company E paid a 10% stock dividend.

Explanation of Solution

If the stock dividend is increased the number of shares outstanding without changing the market value of the firm, hence, the value per share will decline.

Expected stock price = Current price(1+dividend payout ratio)=$861.10=$78.18

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
General Finance Question
Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes): Income Statement Balance Sheet Sales Costs $ 40,000 Assets 34,160 $26,000 Debt Equity $ 7,000 19,000 Net income $ 5,840 Total $26,000 Total $26,000 The company has predicted a sales increase of 20 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) Pro forma income statement Sales Costs $ 48000 40992 Assets $ 31200 Pro forma balance sheet Debt 7000 Equity 19000 Net income $ 7008 Total $ 31200 Total 30304 What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.) External financing needed $ 896
An insurance company has liabilities of £7 million due in 10 years' time and £9 million due in 17 years' time. The assets of the company consist of two zero-coupon bonds, one paying £X million in 7 years' time and the other paying £Y million in 20 years' time. The current interest rate is 6% per annum effective. Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays in 7 year's time) such that the first two conditions for Redington's theory of immunisation are satisfied. Express your answer to THREE DECIMAL PLACES.
Knowledge Booster
Background pattern image
Finance
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Text book image
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Stockholders Equity: How to Calculate?; Author: Accounting University;https://www.youtube.com/watch?v=2jZk1T5GIlw;License: Standard Youtube License