Management action and stock value

Assignment Help Financial Management

Reference no: EM131598094

REH? Corporation's most recent dividend was $1.93 per? share, its expected annual rate of dividend growth is 5?%, and the required return is now 15?%. A variety of proposals are being considered by management to redirect the? firm's activities. Determine the impact on share price for each of the following proposed actions.

a. Do? nothing, which will leave the key financial variables unchanged.

b. Invest in a new machine that will increase the dividend growth rate to 6?% and lower the required return to 12?%.

c. Eliminate an unprofitable product? line, which will increase the dividend growth rate to 8 8?% and raise the required return to 17%.

d. Merge with another? firm, which will reduce the growth rate to 1?% and raise the required return to 17?%.

e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 9% and increase the required return to 17?%.

Reference no: EM131598094

Questions Cloud

What is the profitability index for each project : What is the profitability index for each project? Which, if either, of the projects should the company accept?

What is the level of excess reserves : What is the level of excess reserves? Which of the following can be associated with the modern objectives of the Fed?

Means of reducing household poverty : Do you think the minimum wage law is an economically efficient means of reducing household poverty? Why or why not?

Discuss the historical information about the organization : We have discussed a number of organizational development and change theories and concepts throughout this semester.

Management action and stock value : REH? Corporation's most recent dividend was $1.93 per? share, Do? nothing, which will leave the key financial variables unchanged.

What are the best goals for the fed : What are the best goals for the Fed? Why? How does the structure of the Fed insulate monetary policy decision makers from political pressure?

Company makes all sales of products and services : USA Tech company makes all sales of products and services in U.S. dollars.

Risks for the macro-economy : If a bank fails, what are the risks for the macro-economy that do not exist for other businesses?

Breakeven and leverage : What would be WCC's EPS (1) under the old production process, (2) under the new process if it uses debt, and (3) under the new process if it uses common stock?

User Account

All Pages