Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 14, Problem 8QP
Summary Introduction
To determine: Changes in the equity of the firm due to the repurchase of dividends.
Introduction:
Stock repurchase: A company buying its own stock is termed as stock repurchase. It is like the buyback of shares, whereas the cash dividend is the sharing the company’s earnings among the shareholders of the company.
Summary Introduction
To determine: The new outstanding share.
Summary Introduction
To determine: The price per share after the share repurchase.
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Shares repurchase and the previous problem? Suppose the company had. Announce is going to repurchase $21,850 worth of stock instead of repairing a dividend. What effects would the transaction have on the equity of the firm? How many shares will be outstanding? What will the price per share before the repurchase? Ignoring tax effects, shows how the share repurchase is affectively the same as a cash dividend.
We are to choose the dividend payment policy in the company in such a way as
to maintain the current market value (price) of the company. There are two
dividend payment models to choose from: fixed dividend and the Gordon model.
Please indicate how much (in percentage points) should the nearest fixed
dividend be higher than the nearest dividend paid according to the Gordon
model, if we assume that the increase in profits of the company (to be distributed
among shareholders) will be at the level of 1.5% each year and we assume that
the discount rate in this market will be 7%. Calculate the fixed dividend if the
nearest dividend according to the Gordon model is 10 PLN.
В I
Which of the following statements is correct?
a. Companies may pay too high a price in a large open market repurchase if it takes too long to complete.
b. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.
c. An investor's capital gains from selling stock in a repurchase are always taxed at a higher rate than if the distribution were dividends.
d. The tax code encourages companies to pay dividends rather than reinvest earnings.
e. The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model.
Chapter 14 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 14.1 - Prob. 14.1ACQCh. 14.1 - Prob. 14.1BCQCh. 14.1 - Prob. 14.1CCQCh. 14.2 - Prob. 14.2ACQCh. 14.2 - Prob. 14.2BCQCh. 14.2 - Prob. 14.2CCQCh. 14.3 - Prob. 14.3ACQCh. 14.3 - Prob. 14.3BCQCh. 14.5 - Prob. 14.5ACQCh. 14.5 - Prob. 14.5BCQ
Ch. 14 - What are the forms of cash dividends?Ch. 14 - Prob. 14.2CCh. 14 - Prob. 14.3CCh. 14 - Prob. 14.4CCh. 14 - Prob. 14.5CCh. 14 - Prob. 1CTCRCh. 14 - Prob. 2CTCRCh. 14 - Prob. 3CTCRCh. 14 - Prob. 4CTCRCh. 14 - Prob. 5CTCRCh. 14 - Prob. 6CTCRCh. 14 - Prob. 7CTCRCh. 14 - Prob. 8CTCRCh. 14 - Dividend Policy. During 2014, 207 companies went...Ch. 14 - Prob. 10CTCRCh. 14 - Prob. 1QPCh. 14 - Prob. 2QPCh. 14 - Prob. 3QPCh. 14 - Prob. 4QPCh. 14 - Prob. 5QPCh. 14 - Stock Splits and Stock Dividends. Bermuda Triangle...Ch. 14 - Prob. 7QPCh. 14 - Prob. 8QPCh. 14 - Prob. 9QPCh. 14 - Prob. 10QPCh. 14 - Stock Splits. In the previous problem, suppose the...Ch. 14 - Prob. 12QPCh. 14 - Dividend Policy. The Quick Buck Company is an...Ch. 14 - Expected Return, Dividends, and Taxes. The Gecko...Ch. 14 - Prob. 15QPCh. 14 - Prob. 1CCCh. 14 - Prob. 2CCCh. 14 - Prob. 3CCCh. 14 - Prob. 4CCCh. 14 - Prob. 5CCCh. 14 - Prob. 6CC
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
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