User Account

All Pages

Questions based on the miller and modigliani model

Assignment Help Basic Statistics
Reference no: EM132066747

Q: The Well Company belongs to a risk class for which the appropriate discount rate is 10%. Well currently has 100,000 outstanding shares selling at $100 each. The firm is contemplating the declaration of a $5 dividend at the end of the fiscal year that just began. Answer the following questions based on the Miller and Modigliani model. If Well makes $2 million of new investments at the beginning of the period, earns net income of $1 million, and pays the dividend at the end of the year, how many shares of new stock must the firm issue to meet its funding needs? 

A: Mann's outflows for investments are $2,000,000. These outflows occur immediately. One year from now, the firm will realize $1,000,000 in net income and it will pay $500,000 in dividends, but the need for financing is immediate. Mann must finance $2,000,000 through the sale of shares worth $100. It must sell $2,000,000 / $100 = 20,000 shares.

My question:

The answer is the correct answer. I am wondering can I just say:it needs 2,000,000/100= 20,000 shares?

If I can, why the question gives "net income"?

If I cannot, what is difference?

Reference no: EM132066747

Questions Cloud

The forward rate premium of the peso : According to interest rate parity argument what should the forward rate premium of the peso with respect to the U.S. dollar be.
What does the report author blame for the problems : In this assignment, you are to play the role of an expert on managing major programs. Assume the following lengthy article that appeared in the Boston Globe.
How much will you need to deposit each month until : If your account earns 7% interest compounded monthly, how much will you need to deposit each month until retirement to achieve your retirement goals?
Expected value of next year annual dividend : EZ just paid an annual dividend of $.68 per share. The firm has a target payout ratio of .6 and a speed of adjustment value of .4.
Questions based on the miller and modigliani model : The Well Company belongs to a risk class for which the appropriate discount rate is 10%. Well currently has 100,000 outstanding shares selling at $100 each
European monetary union on the member countries : What is the effect of european monetary union on the member countries? Are there any positive or negative consequencesof it for the U.S.
Issue a liquidating dividend : If I own 460 shares of stock and the company plans on issuing a dividend of $.90 one year from today and will issue a liquidating dividend of $5.40 per share
Create a performance work statement to capture key elements : Create a performance work statement to capture key elements of the project effort described immediately above. Use the Wright Brothers PWS example found.
China or supporting your loyal employees : Which is more important, yielding to a major force such as China or supporting your loyal employees?

Reviews

Write a Review

Basic Statistics Questions & Answers

  How much would bob need to save annually

how much would Bob need to save annually over the next 25 years assuming he earns 7% interest?

  What percentage of the population has an iq more 120 if the

intelligence quotient iq in a certain population is normally distributed with a mean of 100 and standard deviation of

  Probability that average catch is less than pounds

If a random sample of 36 lobster fishermen is selected, what is the probability that their average catch is less than 31.5 pounds? Assume the distribution of the weights of lobster is normal.

  Appropriate z value-p-value and conclusion

Pick an appropriate z value, p-value and conclusion. Round your answer to the nearest thousandth.

  Consider a normal population with a mean of 10 and a

consider a normal population with a mean of 10 and a variance of 4. find px

  A gallop poll that was based on telephone

A gallop poll that was based on telephone interviews conducted April 9-12, 2012, using a random sample of 1016 adults aged 18 and older, living in all 50 US states and the District of Columbia, indicated that 29% of Americans spent more money in rece..

  Confidence interval estimating the proportion of all student

The 99% confidence interval estimating the proportion of all students at the university who prefer outdoor exercise is given by which of the following?

  Proportion of sps professors

Suppose sps professors have an average life normally distributed of 82 years, with a population standard deviation of 5 years.

  Probability that monthly landline phone bill is less

A standard deviation of $20, obtain the probability that a monthly landline phone bill for a household is less than $100.

  Find the regression equation for predicting female students

Find the regression equation for predicting female students from the number of students in a subject area and report it. Interpret the sign of the slope clearly

  Hypothesis test on proportions-work for employs

The company you work for employs 585 assembly-line workers - 526 men and 59 women. 16 men and 10 women have been laid off.

  A linear regression function by ordinary least squares

Refer to Machine speed Problem 11.7. Demonstrate numerically that the weighted least squares. estimates obtained in part (e) are identical to those obtained when using transformation (11.23) and ordinary least squares.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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