Planned capital budget for the upcoming year

Assignment Help Financial Management

Reference no: EM131334045

You know the following about the firm: Their planned capital budget for the upcoming year is $100.5 million. Their forecasted net income is $150.0 million. The firm has $50.0 million in short-term investments. The firm’s value of operations is $1,937.5 million. The firm carries $242.2 million in debt, and has no preferred stock. There are 100 million shares outstanding. 1. Outline the procedure for setting dividend policy. Include in your discussion: Signaling hypothesis, clientele effect, stock splits, stock dividends 2. Calculate, based on the existing capital structure of 87.5 percent equity, how much equity and debt must be raised to finance the planned capital budget. 3. a. Use the residual distribution approach to determine how much should be paid out as dividends to new shareholders. b. What would be the new payout ratio, and what would be the dividend per share amount? 4. Using an Excel data table, show how the payout ratio and DPS would change if net income fell into a range of $90.0 million to $150.0 million. Use increments of 5 million for your analysis. 5. Calculate, based on the firm’s current value of operations, the intrinsic value of equity and the intrinsic price per share. 6. Assume now that the firm has distributed the dividends calculated in question 2. a. What would be the new intrinsic value of the equity and the new intrinsic price per share? b. What would be the new dividend per share? 7. Assume now the firm made the distribution in the form of a stock repurchase. a. What would be the new intrinsic value of the equity? b. How many shares remain outstanding after the repurchase? c. What is the intrinsic price per share of stock after the repurchase? 8. Summarize your findings in a brief recommendation memorandum to Haakon and Per.

Reference no: EM131334045

Questions Cloud

Difference between mortality and reproductive rates : What is the difference between mortality and reproductive rates? Do you think that they equally make an impact on population growth? If yes or no, why?

Surrounding human population growth : Do you think there are political issues surrounding human population growth? Why or why not? Can you give an example?

Balance of normal microbiota : Let's discuss the role of the intestinal microbiota in the maintenance of health and the many opportunistic pathogens that cause disease when the delicate balance of normal microbiota in this region of the body is disturbed.

Analysis of current health care records : Write a paper comparing and contrasting the collection of secondary data and their uses versus the analysis of current health care records and internal data such as incident reports and patient surveys

Planned capital budget for the upcoming year : You know the following about the firm: Their planned capital budget for the upcoming year is $100.5 million. Their forecasted net income is $150.0 million. Calculate, based on the existing capital structure of 87.5 percent equity, how much equity and..

Respiratory-digestive-urinary and reproductive systems : Focusing on the respiratory, digestive, urinary, and reproductive systems. Create a scenario and give your patient a disease associated with any of these systems and present the history and symptoms of the particular disease below the question. Be..

Intercellular diffusion of sodium : How do gap junctions function with the intercellular diffusion of sodium

Estimate that the market risk premium : You estimate that the market risk premium is 8%, the size premium is 2%, the book-to-market premium is 2%, and the risk free rate is 1%. All of these expected returns are APR rates compounded annually. You believe that American Express has a market b..

Socioeconomic status and disease management : Explain the influence of lifestyles, socioeconomic status, and disease management regarding the flu.

User Account

All Pages