(a) An all equity firm has the following expectations about earnings this year. State Recession Normal Expansion Earnings (£m) 1.5 2 2.5 Assume that each state of the economy has an equal probability of occurring this year and that the firm pays no taxes. The firm has 5 million shares outstanding (i) Calculate the earnings per share (EPS), in each state of the economy, and calculate the expected earnings this year. (ii) Calculate the variance and the standard deviation of this firm's EPS (b) Now assume that the firm has issued £5 million worth of debt, and used the proceeds from the debt issue to repurchase half of its shares. Assume that the return on debt is 10%. (i) Calculate the earnings per share (EPS), in each state of the economy, and calculate the expected earnings this year after the repurchase.  (ii) Calculate the variance and the standard deviation of this firms EPS (c) Compare your results for parts (a)(ii) and (b)(ii) above and explain if, and how, they differ and explain why this is the case.

Q: Rocket Co. has just paid a dividend of $1.15 per share. The firm pays annual dividends. It is…

A: Part I: Dividends paid for first 6 years Part II: Dividend paid forever after the 6th year

Q: Omni Consumer Products just paid a dividend of 1.34 and anticipates a short term growth rate of 16%…

A: Using Dividend Discount Model

Q: The 5-year average P/E ratio for a firm is 20.00. This year 's earning per share is $5.00 and it is…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Pharmecology just paid an annual dividend of $1.50 per share. It’s a mature company, but future EPS…

A: A corporation needs capital for its various functions and operations and for acquiring capital it…

Q: Given the following possible returns (dividends plus capital gains) over the coming year from…

A: Probability Return Expected return A B C=A*B 0.20 -1000 -200 0.60 1500 900 0.20 2500 500…

Q: Soylent Corp expects to generate earnings over the coming twelve months of $$6.656.65 per share…

A: Given:

Q: Express Industry’s expected net income for next year is $1.6 million. Its target, and current,…

A: Under the residual dividend policy, the dividends are paid to shareholders after the profits for the…

Q: High Growth Company pays no dividend for the next 3 years. The company will pay $4 dividend 4 years…

A: The future price of a stock can be calculated by adding a growth rate to the dividend. The current…

Q: United Builders wants to maintain a target capital structure with 30% debt and 70% equity. Its…

A: Dividend payout ratio measures the dividend payout in relation to the net income generated by the…

Q: 2.  The Hall Dental Supply Company sells at $32 per share, and Randy Hall, the CEO of this…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: Your company faces a 30% tax rate and has $264 million in assets, currently financed entirely with…

A: Earnings per share (EPS) in each state: State Pessimistic Optimistic Probability of State 0.30…

Q: A stock price is expected to pay a year-end dividend of 2.00$. The dividend is expected to decline…

A: Computation:

Q: 1. Beta Budget Brooms will pay a big $2 dividend next year on its common stock, which is currently…

A: The required rate of return can be calculated by using the following formula.   Required rate of…

Q: Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of…

A: Computation of required return is as follows:Dividend yield+growth rate8%+5%13%D1=(2.5×1.5)…

Q: Given the possible returns (dividend plus capital gains) over the coming year from a $10,000…

A: Expected return =P1 r1+P2 r2+P3r3 P is probability and r is return  Expected return =-1000 ×…

Q: The firm just paid a dividend of D0 = ₱ 1.32. Analysts expect the company's dividend to grow by 30%…

A: Since you have asked multiple questions, we will solve the first question for you. Please ask…

Q: GTB, Inc. has a 25 percent tax rate and has $67.92 million in assets, currently financed entirely…

A: The cost of debt is 9%.The weight of debt in capital structure is 25%. So, the value of debt must be…

Q: Your company doesn't face any taxes and has $755 million in assets, currently financed entirely with…

A: EPS (Earnings per share) is portion of total earnings that is due to each issued share of company.…

Q: Your company doesn't face any taxes and has $768 million in assets, currently financed entirely with…

A: given, value of asset = $768,000,000 value of debt = 15% x value of asset value of debt =…

Q: Daddi Mac, Inc., doesn't face any taxes and has $250 million in assets, currently financed entirely…

A: Here, Total Assets is $250 million Proposed Plan is : Debt is 30%  Equity is 70% Equity per share is…

Q: Pharmecology just paid an annual dividend of $2.35 per share. It’s a mature company, but future EPS…

A: Given Dividend is $2.35 Nominal cost of capital is 12% Inflation rate is 5.25%

Q: Ornaments, Inc., is an all-equity firm with a total market value of $608,000 and 26,200 shares of…

A: Earnings per share It is the entity’s net profit that is divided by a number of outstanding common…

Q: Sunland, Inc., management expects to pay no dividends for the next six years. It has projected a…

A: A model that helps to evaluate the value of the stock with the assumption that the dividend will…

Q: Mama Inc. utilizes the residual dividend model to determine its ordinary dividend payout. This year…

A: Introduction Under Residual dividend policy the amount of dividends paid to the shareholders amount…

Q: a company will generate payoffs to investors the following year which depend on state of economy as…

A: GIVEN, Are the three scenarios, boom normal and recession. The return of the stock can be calculate…

Q: Assume that the average firm in Masters Corporation’s industry is expected to grow at a constant…

A: Basic Details: a. Growth Rate = 3% b. Dividend Yield = 5% c. Dividend in year 0 = $2.50 d. Dividend…

Q: Hypothetics Inc. has just paid the annual dividend to shareholders based on $5 earnings per share…

A: Last EPS = $5 Plowback ratio = 40% Payout ratio = 100%-Plowback ratio                      =…

Q: C.) Given the possible returns (dividend plus capital gains) over the coming year from a $10,000…

A: 16-20)   probability RETURN RETURN % (RETURN/10,000) Return% x PROBABILITY RECESSION 0.2…

Q: Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of…

A: Growth= 5% Dividend yield= 8%. Dividend (D0)= $2.5 g0,1 = 50% g1,2 = 30% Dividend growth after year…

Q: A company generated a return of  5.5%.  As per the latest annual report, the company has an…

A: The given information are: Particulars Value Total Debt 50000000 Total Equity 70000000…

Q: A firm is expecting a: • $2 dividend to be paid to shareholders in one year (t=1); • $5 dividend the…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: Your company doesn't face any taxes and has $755 million in assets, currently financed entirely with…

A: Capital structure shows the total external borrowings from different sources. Generally, Capital…

Q: Quantitative Problem: Barton Industries expects next year's annual dividend, D1, to be $2.00 and it…

A: D1 = $2 g= 4.9% Current stock price =P0 = $23.50 Flotation cost = 4.9% Cost of equity without…

Q: No.7 can maximize the market value of the firm as per Walter's model Accordingly, each year at…

A: Dividend payout is the ratio which defines the capacity of the company in paying off its…

Q: Company A's historical returns for the past three years are 6 percent, 15 percent, and 15 percent.…

A: The capital asset pricing model is a financial concept that is widely used. In this model, the…

Q: A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected…

A: Dividend Discount Model would be considered as the model under which the price of the stock is…

Q: You are planning to invest in a share. There are four possible returns from the share over the next…

A: Expected return = sum total of Probbaility * return

Q: Your company has a 34% tax rate and has $510 million in assets, currently financed entirely with…

A: EPS (Earnings per share) is portion of total earnings that is due to each issued share of company.…

Q: Given the following possible returns (dividends plus capital gains) over the coming year from…

A: Probability Return 0.20 -1000 0.60 1500 0.20 2500

Q: Pharmacology just paid an annual dividend of $1.80 per share. It’s a mature company, but future EPS…

A: given, D0=$1.80r=11.75%g=5%inflation = 5%

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.