Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 7, Problem 7.2WUE
Summary Introduction
To determine: The net proceeds from the sale of stock.
Introduction: Common stock is a security which represents the ownership in company. Common stock holder have are right to take decision on corporate policy.
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Q15
Consider a firm that had been priced using a 10 percent growth rate and a 12 percent required return. The firm recently paid a $1.20 dividend. The firm just announced that because of a new joint venture, it will likely grow at a 10.5 percent rate.How much should the stock price change (in dollars and percentage)? (Round your answers to 2 decimal places.)
CHANGE IN STOCK PRICE
CHANGE IN STOCK PERCENT. %
Intro
A company has had net income of $22 million in its most
recent year and wants to distribute 40% of its net
income to shareholders through either dividends or
stock repurchases. The firm currently has 2 million
shares outstanding, trading at $60.
Part 1
What is EPS after a dividend payment?
0+ decimals
Submit
Part 2
What is EPS after a stock repurchase?
1+ decimals
Submit
Part 3
Would shareholders be better off with a stock
repurchase compared to a dividend payment (ignore
taxes and signalling effects)?
Yes, since it increases EPS.
O Yes, since the company bought their shares.
O No, since the higher EPS comes at a cost.
O No, since EPS won't be higher in the future.
Submit
QUESTION 17
If a company has 2240 million shares outstanding and each share is worth AUD 3.60 the market capitalization (value of the company) is
million AUD. The company seeks to raise AUD 728 million by selling new shares with a subscription price of AUD 2.60, therefore it
has to issue
million new shares. After issuing these new shares successfully its new market capitalization will be
million AUD and the total amount of shares will grow to
million.
As a result the value of each share after the issue will be
AUD. The difference between the subscription price and the share price
after the issue is
AUD. Therefore, it is worth to pay up to
AUD for the RIGHT to buy shares at AUD
2.60.
Compare the old share price with the share price after the issue. It dropped by
AUD. The ratio of the number of old shares to
newly issued shares is exactly
. This is also the number of old shares you need to get ONE RIGHT for a new share. HINT: Check if
old shareholders' losses can be recovered by selling…
Chapter 7 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 7.1 - What are the key differences between debt and...Ch. 7.2 - What risks do common stockholders take that other...Ch. 7.2 - Prob. 7.3RQCh. 7.2 - Explain the relationships among authorized shares,...Ch. 7.2 - Prob. 7.5RQCh. 7.2 - Prob. 7.6RQCh. 7.2 - Explain the cumulative feature of preferred stock....Ch. 7.3 - Describe the events that occur in an efficient...Ch. 7.3 - Prob. 7.9RQCh. 7.3 - Describe, compare, and contrast the following...
Ch. 7.3 - Describe the free cash flow valuation model, and...Ch. 7.3 - Explain each of the three other approaches to...Ch. 7.4 - Prob. 7.13RQCh. 7.4 - Assuming that all other variables remain...Ch. 7 - Prob. 7.1STPCh. 7 - Learning Goal 5 ST7-2 Free cash flow valuation...Ch. 7 - Prob. 7.1WUECh. 7 - Prob. 7.2WUECh. 7 - Prob. 7.3WUECh. 7 - Prob. 7.4WUECh. 7 - Prob. 7.5WUECh. 7 - Prob. 7.6WUECh. 7 - Authorized and available shares Aspin...Ch. 7 - Preferred dividends Acura Labs Inc. has an...Ch. 7 - Learning Goal 2 P7-3 Preferred dividends In each...Ch. 7 - Learning Goal 2 P7-4 Convertible preferred stock...Ch. 7 - Learning Goal 4 P7-5 Preferred stock valuation TXS...Ch. 7 - Prob. 7.6PCh. 7 - Preferred stock valuation Jones Design wishes to...Ch. 7 - Learning Goal 4 P7-8 Common stock value: Constant...Ch. 7 - Common stock value: Constant growth McCracken...Ch. 7 - Learning Goal 4 P7- 11 Common stock value:...Ch. 7 - Prob. 7.12PCh. 7 - Prob. 7.13PCh. 7 - Learning Goal 4 P7-14 Common stock value: Variable...Ch. 7 - Prob. 7.15PCh. 7 - Prob. 7.16PCh. 7 - Learning Goal 5 P7-17 Free cash flow valuation...Ch. 7 - Prob. 7.20PCh. 7 - Prob. 7.21PCh. 7 - Prob. 7.22PCh. 7 - Prob. 7.23PCh. 7 - Integrative: Risk and valuation Hamlin Steel...Ch. 7 - Prob. 7.25P
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