Use the cash to repurchase stock instead

Assignment Help Financial Management
Reference no: EM132006430

The Kathryn St. J. Corporation will pay a constant dividend of $2 per share, per year, in perpetuity. Assume all investors pay a 25% tax on dividends and there is no capital gains tax. The cost of capital for investing in KSJ stock is 13%. (Show Calculations)

a. What is the price of a share of KSJ stock?

b. Assume that management makes a surprise announcement that KSJ will no longer pay dividends but will use the cash to repurchase stock instead. What is the price of a share of KSJ stock now?

Reference no: EM132006430

Questions Cloud

Monetary and fiscal policy on aggregate demand : What are the implications of these lags for the debate over active versus passive policy?
Describe the various pre-trial stages of criminal trial : What is the dual-court system? Identify and explain the three levels characteristic of the federal judiciary - Identify and describe the various pre-trial stage
What is the current share price : If the required return is 0.11 and the company just paid a $0.65 dividend, what is the current share price?
What institutional arrangements are necessary to promote : What institutional arrangements are necessary to promote a sound, stable banking system?
Use the cash to repurchase stock instead : Assume that management makes a surprise announcement that KSJ will no longer pay dividends but will use the cash to repurchase stock instead.
Main determinants of economic growth : What are the 3 main determinants of economic growth? Do we have to give from both demand and supply side?
What is the firm operating cash flow : what is the firm’s operating cash flow?
Rise of julius caesar : What factors that were contributed to the rise of Julius Caesar and do you believe his efforts to establish a dictatorship in Rome in the first
Changes in the operating cycle : Changes in the Operating Cycle. Indicate the effect that the following will have on the operating cycle.

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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