Company need to raise to finance the extra dividend payment

Assignment Help Financial Management

Reference no: EM131839035

Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.9 million shares that are outstanding. Shareholders require a rate of return of 10% from Consolidated stock.

a. What is the price of Consolidated stock?

b. What is the total market value of its equity? (Enter your answer in millions.)

Consolidated now decides to increase next year’s dividend to $20 a share, without changing its investment or borrowing plans. Thereafter the company will revert to its policy of distributing $10 million a year.

c. How much new equity capital will the company need to raise to finance the extra dividend payment? (Enter your answer in millions.)

d. What will be the total present value of dividends paid each year on the new shares that the company will need to issue? (Enter your answer in millions.)

e. What will be the transfer of value from the old shareholders to the new shareholders? (Enter your answer in millions.)

Reference no: EM131839035

Questions Cloud

Charge of assault causing bodily harm : Does Defarge have any defence to a charge of assault causing bodily harm? Would it make any difference to your answer if Defarge

Conducting research to support assertions : You have assessed each of the individual's performance and now it is time to conduct a feedback session.

Right of information act 2009 and information privacy act : What is the difference between Right of Information act 2009 and Information Privacy act 2009.

Sides of the argument from a legal perspective : Present both sides of the argument from a legal perspective. Reach a conclusion. What is a Judge going to do with Amy's lawsuit?

Company need to raise to finance the extra dividend payment : What is the price of Consolidated stock? How much new equity capital will the company need to raise to finance the extra dividend payment?

Prepare a program that asks the user to enter an integer n : Prepare a program that asks the user to enter an integer n into a text field. When a Draw button is clicked, draw an n-by-n grid in a component.

Will there always be some transactional purchases : Assume that there exists asymmetrical dependence between a buyer and a seller. Answer the following questions two ways.

Consider the framers original legislative intent : Does the living tree doctrine adequately consider the framers' original legislative intent?

Write a program that displays the olympic rings : Write a program that displays the Olympic rings. Color the rings in Olympic colors. Provide a method draw Ring that draws a ring of a given position and color.

User Account

All Pages