Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays th dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $6.00 on its common stock in a single annual installment, management plans on raising this dividend by 6.25 percent per year, indefinitely. If the required return on this stock percent, what is the current share price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the comp has just paid a dividend of $1.50 per share, as it has for the previous three quarters. What is your value for the curren share price now? (Hint: Find the equivalent annual end-of-year dividend for each year.) Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Current share price. $ 231.82

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays th dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $6.00 on its common stock in a single annual installment, management plans on raising this dividend by 6.25 percent per year, indefinitely. If the required return on this stock percent, what is the current share price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the comp has just paid a dividend of $1.50 per share, as it has for the previous three quarters. What is your value for the curren share price now? (Hint: Find the equivalent annual end-of-year dividend for each year.) Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Current share price. $ 231.82

Name: Most corporations pay quarterly dividends on their common stock rathe
Uploaded: 2024-03-20T06:51:32.000Z
Channel: Bartleby
Description: Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusualcircumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays thisdividend out in

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

See similar textbooks

Similar questions

Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders. Suppose a company currently pays an annual dividend of $3.00 on its common stock in a single annual installment, and management plans on raising this dividend by 6.25 percent per year, indefinitely. If the required return on this stock is 9 percent, what is the current share price? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.75 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint: Find the equivalent annual end-of-year…
Most corporations pay quarterly dividends on their common stock rather than annual dividends. Barring any unusual circumstances during the year, the board raises, lowers, or maintains the current dividend once a year and then pays this dividend out in equal quarterly installments to its shareholders. a. Suppose a company currently pays an annual dividend of $3.20 on its common stock in a single annual installment, and management plans on raising this dividend by 6.5 percent per year indefinitely. If the required return on this stock is 8 percent, what is the current share price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Now suppose the company in part (a) actually pays its annual dividend in equal quarterly installments; thus, the company has just paid a dividend of $.80 per share, as it has for the previous three quarters. What is your value for the current share price now? (Hint: Find the equivalent annual end-of-year dividend…
XYZ Electronics Inc. is all equity financed and generates perpetual annual EBIT of $600. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year. Assume that XYZ has a 100% payout rate, 5,000 shares outstanding, and that shareholders require a return of 5%. Assume that the tax rate is 0%. XYZ is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares at the price of $4.00 per share. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 3%. Assume that the tax rate is 0%. If XYZ goes ahead with the repurchase, then what is the value of the company after the repurchase is complete?
Some Public Companies may pay quarterly dividends on their common stock ratherthan annual dividends. The Board of Directors as dictated by cash flows can adjust or maintain the currentdividend once a year or pays a dividend based on quarterly installments to its shareholders.a) Joe Giant PLC currently pays a dividend of $4.88 on its common stock in one single annual installment. CEO of Joe’s, Mr. Jim Davis, plans on raising this dividend by 3.5% percent per year for the conceivable future. If the required return on this stock is 8.60 percent, what is the current share price? b) On the contrary, if Joe Giant PLC pays its yearly dividend in equal quarterly installments, as it has for the previous three quarters; What is your value for the current share price now? PLEASE ANSWER PART B
XYZ Soda Inc. is all equity financed and generates perpetual annual EBIT of $300. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year. Assume that XYZ has a 100% payout rate, 1,500 shares outstanding, and that shareholders require a return of 5%. Assume that the tax rate is 0%. XYZ is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares at the price of $4.00 per share. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds worth a total sum of $1,200 and a coupon rate (and yield) of 3%. Assume that the tax rate is 0%. If XYZ goes ahead with the repurchase, then what is its WACC after the repurchase is complete?
XYZ Motor Corp. is all equity financed and generates perpetual annual EBIT of $300. Assume that the EBIT, and all other cash flows, occur at year end and that we are currently at the beginning of a year. Assume that XYZ has a 100% payout rate, 1,500 shares outstanding, and that shareholders require a return of 5%. Assume that the tax rate is 0%. XYZ Motor Corp. is considering an open market stock repurchase. It plans to buy 20% of its outstanding shares at the price of $4.00 per share. The repurchased shares will be cancelled. It will finance the repurchase by issuing perpetual bonds with a coupon rate (and yield) of 3%. Assume that the tax rate is 0%. If XYZ Motor Corp. goes ahead with the repurchase, then what is the stock price after the repurchase is complete?
Xijiang issued 1000 shares at the beginning of fiscal year (t=0), and the net profit at the end of fiscal year (t=1) is expected to be 2million won. (zhuxijiang plans to pay a total of 800000 won as dividends to shareholders at the end of the accounting year, and the rest will be retained for internal reinvestment. (Zhou) the average self capital profit margin (roe= current net profit of the accounting year / self capital at the beginning of the accounting year) of Xijiang in each accounting year will be maintained at 20%. (shares) Xijiang's dividend policy and self capital profit margin will continue to be maintained. The annual required rate of return (RRR) of the enterprise in the market is 16%. If the dividend growth rate (or profit growth rate) of the company is equal to the return on self capital (ROE) multiplied by the internal retention rate, please answer the following questions. The dividend discount model is used to calculate the stock price at the beginning of the…
The following information and questions pertain to the Central Dental Company The Central Dental Company has a preferred stock that pays a $5.5 dividend each year, and currently sells for $64.50. The company's marginal tax rate is 40 percent.The market price of the Central Dental Company's common stock is $46. The dividend to be paid at the end of the following year is $4.6 per share and is expected to continue to grow indefinitely at a constant rate of 6%.Central Dental Company’s has a before-tax cost of debt ki = 10%. Its tax rate is 40%. a) Based on the information about the Central Dental Company, what is the cost of preferred stock, kps, for Central Dental Company? SHOW YOUR CALCULATION b) Based on the information about the Central Dental Company’s common stock, calculate the cost of this common stock. SHOW YOUR CALCULATION c) Based on the information about the Central Dental Company’s before-tax cost of debt, ki and its tax rate, what is Central Dental Company’s after-tax cost of…
Carlton Containers has a dividend policy whereby the firm pays a constant annual dividend of $1.95 per share of common stock. The firm has 10,000 shares of stock outstanding. The company ??? - must always show a current liability of $19,500 ($1.95 x 1,000) for dividends payable. - is obligated to pay $1.95 per share each year in perpetuity. - must still declare each dividend before it becomes an actual company liability. - will be declared in default if it does not pay at least $1.95 per share per year on a timely basis. - has a liability that must be paid at a later date should the company miss paying an annual dividend payment.
Texas Tea's dividend policy calls for the dividend to be increased each year by the same rate. Last year, the company paid a dividend equal to $1.50 per share. This year, after the company initiates a 5-for-1 stock split, Texas Tea expects to pay a dividend equal to $0.33 per share. At what rate does Texas Tea increase its dividend each year? Round your answer to two decimal places.
Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 32% income tax bracket. Assume that Plum will reinvest its after-tax earnings in the growth of the company. Should Plum operate as a C corporation or as an S corporation? Assume that Plum will distribute its after-tax earnings each year to its shareholders. Should Plum operate as a C corporation or as an S corporation?
Poulter Corporation will pay a dividend of $3.90 per share next year. The company pledges to increase its dividend by 5 percent per year, indefinitely. If you require a return of 8 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)