House of Haddock has 5,090 shares outstanding and the stock price is $149. The company is expected to pay a dividend of $29 per share next year and thereafter the dividend is expected to grow indefinitely by 2% a year. The President, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. There are no taxes.
a-1. What is the total value of the company before the announcement? (Enter your answer in whole numbers not in millions.)
Total value $
a-2. What is the total value of the company after the announcement? (Enter your answer in whole numbers not in millions.)
Total value $
a-3. What is the value of one share? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.)
Value $
b. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
year 1: $
year 2: $
House of Haddock has 5,090 shares outstanding and the stock price is $149. The company is expected to pay a dividend of $29 per share next year and thereafter the dividend is expected to grow indefinitely by 2% a year. The President, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. There are no taxes.
a-1. What is the total value of the company before the announcement? (Enter your answer in whole numbers not in millions.)
Total value $
a-2. What is the total value of the company after the announcement? (Enter your answer in whole numbers not in millions.)
Total value $
a-3. What is the value of one share? (Do not round intermediate calculations. Round your answer to the nearest whole dollar.)
Value $
b. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
year 1: $
year 2: $
Related questions
| Young Corporation stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces plans to raise $4 million by offering shares to the public at a price of $40 per share. |
| a. | If the underwriting spread is 7%, how many shares will the company need to issue in order to be left with net proceeds of $4 million? (Do not round intermediate calculations. Round your answer to the nearest whole number.) |
| Number of shares |
| b. | If other administrative costs are $65,000, what is the dollar value of the total direct costs of the issue?(Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) |
| Total direct costs | $ |
| c. | If the share price falls by 3% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect? (Enter your answer in dollars not in millions.) |
| Cost of the announcement effect | $ |
