Use the cash to repurchase stock instead

Assignment Help Financial Management

Reference no: EM131551632

The JRN Corporation will pay a constant dividend of $3 per share, per year, in perpetuity. Assume that all investors pay a 20% tax on dividends and that there is no capital gain tax. The cost of capital for investing in JRN stock is 12%.

(a) The price of a share of JRN’s stock is closest to:

(1) $20.00 (2) $24.00 (3) $25.00 (4) $18.00

(b) Assume that management makes a surprise announcement that JRN will no longer pay dividends but will use the cash to repurchase stock instead. The price of a share of JRN’s stock is now closest to:

(1) $20.00 (2) $25.00 (3) $18.00 (4) $24.00

Reference no: EM131551632

Questions Cloud

How much they will end up paying back in total : The Full Keg, a music venue in the city of Chicago has recently taken out a $100,000, 15 year amortized loan to with a 3.5% annual interest rate in order make.

Discuss the background of the given issue : You will write a 3 page paper discussing access to health care services. Access is defined in terms of finance, age, culture, ethnicity, religion, geography.

What would be value of share at the end of the year : Value of Share is 100 and expected dividend on the Current year is 10. Required Rate of Return for Investor is 12%.

Discuss right to search persons vehicles and other property : Jeremy accepted a management position at Future Electronics, a distribution center for electronic parts. When arriving for work on the first day.

Use the cash to repurchase stock instead : Assume that management makes a surprise announcement that JRN will no longer pay dividends but will use the cash to repurchase stock instead.

Consider american-style call options on a bond : Consider American-style call options on a bond. Calculate the lowest and highest possible prices for the options with exercise prices of (i) $0.95;

American home products currently has zero debt : American Home Products currently has zero debt. Make a case for whether American Home Products should either borrow 30% debt OR 50% debt.

What is the projects npv-modified internal rate of retun : what is the projects NPV, IRR, MIRR (modified internal rate of return)?

As a holder of prospects convertible bond : As a holder of Prospect’s convertible bond, which of the following actions would you choose to maximize the value of your investment?

User Account

All Pages