company has earnings before interest and taxes of $100,000, and debt (both par a
ID: 2786825 • Letter: C
Question
company has earnings before interest and taxes of $100,000, and debt (both par and market value) of with 5% annual coupon. If the company's cost of capital is 10% and tax rate is 34%, what is the $500,000 value of this firm? For Questions 10- 13 A company has 100,000 shares outstanding, with the share price equals to $30. 10, if the company issues a 20% stock dividend, what will be the new stock price after the stock dividend? 11. If the company issues a 3 for 2 stock split, what will be the new stock price after the stock splits? 12. If the company decides to pay out $120,000 to the shareholders in cash dividends, what will be the stock price after the cash dividends? 13. If the company decides to use $120,000 to buy back shares, what will be the stock price after the stock repurchase? For Questions 14-15 Company A declared a dividend of $o.10 a share on January 20th to holders of record on Tuesday, March 7th The dividend is payable on May 1st 14. When will the stock price drop by $0.10? 15. If you purchased 100 shares of stock on February 20th, and sold 50 shares on March 3rd, how much dividend (in S) will you receive on May 1s?Explanation / Answer
As per chegg guideline in case of multiple question expert should answer 4 question 10 Total value of shares= 100000*30 Total value of shares= 3000000 total share outstanding 100000+20% of 100000 120000 new stock price 3000000/120000 new stock price 25 11 Total value of shares= 100000*30 Total value of shares= 3000000 total share outstanding 100000*3/2 total share outstanding 150000 new stock price 3000000/150000 new stock price 20 12 Total value of shares before dividend= 3000000 Total value after dividend 3000000-120000 Total value after dividend 2880000 total share outstanding 100000 new stock price 2880000/100000 new stock price 28.8 13 With $120000, Company could repurchase $120000/$30 = 4000 shares. The post-repurchase share price would be unchanged at $30 Total value of equity 3000000-120000 Total value of equity 2880000 total share outstanding 1000000-4000 total share outstanding 96000 new stock price 2880000/96000 new stock price 30
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