Dividend Payout

The Wei Corporation expects next year's net income to be $15 million. The firm's debt ratio is currently 40 %. Wei has 12 million of profitable investestment opportunites, and it wishes to maintain its existing debt ratio. According to the residual distribution model (assumiming all payments are in the form of dividends), how large should Wei's divident payout ratio be next year?

Stock Split

After a 5 for 1 stock split, the Strasburg Comapny paid a divident of $0.75 per new share, shich represents a 9% increase over last years pre-sp;it dividend . waht was last year's divident per share?

Net Income/Cash Flow

The Monday Corporation expects to have sales of $20,000,000. Costs other than depreciation are expected to be 70% of sales, and depreciation is expected to be $3,000,000. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Monday’s federal-plus-state tax rate is 40%. What is Monday’s net income? What is Monday’s net cash flow? Suppose Congress changed the tax laws so that Monday’s depreciation expenses doubled. No changes in operations occurred. Then, what would Monday’s net income be? Suppose Congress changed the tax laws so that Monday’s depreciation expenses doubled. No changes in operations occu... click for more

Stock Investment

You are considering an investment in the common stock of Kirk Corporation. The stock is expected to pay a dividend of $3.50 a share at the end of the year (D1 = $3.50). The stock has a beta equal to 0.75. The risk-free rate is 5.0%, and the market risk premium is 5.5%. The stock’s dividend is expected to grow at some constant rate g. The stock currently sells for $50 a share. Assume that the market is in equilibrium. What does the market believe will be the stock price at the end of 2 years? (That is, what is P2?) What does the market believe will be the stock price at the end of 5 years? (That is, what is P5?)

Earnings /Dividends

The earnings, dividends, and stock price of Cattle Technologies Inc. are expected to grow at 8% per year in the future. Cattle’s common stock sells for $30 per share, its last dividend was $3.00, and the company will pay a dividend of $3.24 at the end of the current year. Using the discounted cash flow approach, what is its cost of equity? If the firm’s beta is 1.25, the risk-free rate is 6%, and the expected return on the market is 14%, what will be the firm’s cost of equity using the CAPM approach?