Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 17, Problem 10P

Suppose B&E Press paid dividends at the end of each year according to the schedule below. It also reduced its share count by repurchasing 5 million shares at the end of each year at the ex-dividend stock prices shown. (Assume perfect capital markets.)

Chapter 17, Problem 10P, Suppose BE Press paid dividends at the end of each year according to the schedule below. It also

  1. a. What is total market value of B&E’s equity, and what is the total amount paid out to shareholders, at the end of each year?
  2. b. If B&E had made the same total payouts using dividends only (and so kept is share count constant), what dividend would it have paid and what would its ex-dividend share price have been each year?
  3. c. If B&E had made the same total payouts using repurchases only (and so paid no dividends), what share count would it have had and what would its share price have been each year?
  4. d. Consider a shareholder who owns 10 shares of B&E initially, does not sell any shares, and reinvests all dividends at the ex-dividend share price. Would this shareholder have preferred the payout policy in (b), (c), or the original policy?
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Red, Inc., Yellow Corp., and Blue Company each will pay a dividend of $4.15 next year. The growth rate in dividends for all three companies is 4 percent. The required return for each company’s stock is 8 percent, 11 percent, and 14 percent, respectively. What is the stock price for each company? What do you conclude about the relationship between the required return and the stock price?
Krell Industries has a share price of $22.32 today. If Krell is expected to pay a dividend of $1.07 this year and its stock price is expected to grow to $23.71 at the end of the year, what is Krell's dividend yield and equity cost of capital? a) The dividend yield is ______%. (Round to one decimal place.) b) Capital Gain Rate_____ c) The total return ____%
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Chapter 17 Solutions

Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book

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Dividend explained; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Wy7R-Gqfb6c;License: Standard Youtube License