How much should be returned to stockholders

Assignment Help Finance Basics
Reference no: EM131690305

Question: GL Corporation, a retail firm, is making a decision on how much it should pay out to its stockholders. It has $100 million in investible funds. The following information is provided about the firm:

(a) It has 100 million shares outstanding, each share selling for $15. The beta of the stock is 1.25 and the riskfree rate is 8%. The expected return on the market is 16%.

(b) The firm has $ 500 million of debt outstanding. The marginal interest rate on the debt is 12%.

(c) The corporation's tax rate is 50%.

(d) The firm has the following investment projects:

2359_14.png

The firm plans to finance all its investment needs at its current debt ratio.

(i) Should the company return money to its stockholders?

(ii) If so, how much should be returned to stockholders?

Reference no: EM131690305

Questions Cloud

Explain to what extent your beliefs should affect : Evaluating Van Orden v. Perry, as a public administrator, in the rule of law, explain to what extent your beliefs should affect your reactions to the various
Write a working thesis statement that identifies the topic : Write a working thesis statement that identifies the topic/position you are arguing for, then develop an outline that lists the major points of your discussion.
Create change and offer suggestions to overcome obstacle : Select one of the arguments for why change management programs don't create change and offer suggestions to overcome the obstacle.
How much should be returned to stockholders : GL Corporation, a retail firm, is making a decision on how much it should pay out to its stockholders. It has $100 million in investible funds.
How much should be returned to stockholders : GL Corporation, a retail firm, is making a decision on how much it should pay out to its stockholders. It has $100 million in investible funds.
Do you have an identified area of excellence : Do you have an identified area of excellence?
Explain the army leadership in a garrison environment : 1. How it affects the individual Soldier 2. What does it do for the unit level, Company and/or Battalion 3. How this system impacts the Army as a whole.
Research on free education : Explore 3 - 5 controversial topics and choose one in which you are passionately interested. By choosing a topic that you are interested in and want to know more
Interested in investigating in the field of entrepreneurship : you are interested in investigating in the field of entrepreneurship. using evidence from what Makes a Good Research Question

Reviews

Write a Review

Finance Basics Questions & Answers

  Determine the criteria to rank capital budgeting decisions

A summary of how you will determine the criteria to rank capital budgeting decisions and whether some criteria are more important than others.

  Based on material presented in these chapters discuss the

based on material presented in these chapters discuss the pros and cons of borrowing to finance real estate

  What is the firm value of operations in millions

Mooradian Corporation's free cash flow during the just ended year (t=0) was $100 million, and the FCF is expected to grow at a constant rate of 5.0% in the future. If the weighted average cost of capital is 12.5%, what is the firm's value of opera..

  Explain how a cvp analysis would be useful

Explain how a CVP analysis would be useful for determining whether or not the investment is worth it. Explain limitations of a CVP analysis in this situation.

  What is the capacity of the highway section

What is the capacity of the highway section

  Compute western manufacturing company budgeted

Compute Western Manufacturing Company's budgeted break-even sales - number of units and dollars - for the month of March 20X1

  What is the maximum lump sum payment you are willing to make

What is the maximum lump sum payment you are willing to make today to buy these six future annual shipments?

  Public utility companies usually have capital structures

Why do public utility companies usually have capital structures that are different from those of retail firms?

  What sort of transactions should mary undertake in order

What sort of transactions should Mary undertake in order to hedge

  What is the advantage of homemade leverage to shareholders

what is the advantage of homemade leverage to shareholders and how does the use of this leverage affect a

  Havanna tobacco farms just paid a dividend of 400 pesos on

havanna tobacco farms just paid a dividend of 400 pesos on its stock. the growth rate in dividends is expected to be a

  What is the percentage price change of these bonds

Bond J is a 4 percent coupon bond. Bond K is a 10 percent coupon bond. Both bonds have 12 years to maturity, make semiannual payments, and have a YTM of 7 percent.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd