What is the size of the special dividend

Assignment Help Finance Basics
Reference no: EM132403022

Rockford Cheeses Inc. has 150 million shares outstanding, a current share price of $25, and no debt. Rockford 's management believes that the shares are underpriced, and that the true value is $30 per share. Rockford plans to pay $450 million in cash to its shareholders by repurchasing shares. Management expects that very soon new information about a new product line will come out that will cause investors to revise their opinion of the firm and agree with Rockford 's assessment of the firm's true value.

a. Assume that Rockford is not able to repurchase shares prior to the market becoming aware of the new information regarding Rockford 's true value. What will be the number of shares outstanding following the repurchase if Rockford repurchases the shares following the release of the new information?

b. What will be the price per share after the release of the new information regarding the true value of Rockford, and following the repurchase in a.? Show computations.

c. What is the size of the special dividend that Rockford can pay shareholders instead of the repurchase?

d. What will be the price per share is the special dividend is paid out after the release of the new information regarding the true value of Rockford and there is no repurchase of shares?

Reference no: EM132403022

Questions Cloud

What will be next year dividend : If it's the company's policy to always maintain a constant growth rate in its dividends, what will be next year's dividend?
What is the probability that a randomly selected car : What is the probability that a randomly selected car will get through the restaurant's drive-through in less than 110 seconds
What will be the dividend in year 5 : Bravo Company just paid an annual dividend of $2.00 per share and has announced that future dividends will increase by 3 percent annually.
Summary of the challenges of the current operational process : Summary of the challenges of the current operational process. Describe the current and expected long-term impact of these challenges if they are not addressed.
What is the size of the special dividend : What is the size of the special dividend that Rockford can pay shareholders instead of the repurchase?
Isabella construction and interior design : Isabella Construction and Interior Design is an all-equity company in Central Michigan. The CFO John Thornton Jr. is considering moving
Think of any current technologies : Can you think of any current technologies or tech trends that may reshape the way we do business?
What is the stock expected price : ABC. Inc just paid a dividend of $38.22 per share. The dividends are expected to increase by 1% each year. The required rate of return on the stock
What is the yield to maturity of the bonds : What is the yield to maturity of the bonds? What is the yield to call? What is the yield to worst? Are the bonds likely to be called?

Reviews

Write a Review

Finance Basics Questions & Answers

  Description of present value of annuity

by using the proper PV Table and supposing a 12% annual interest rate, find out the present value on December 31, 2009 of the five period annual annuity of 10000 under each of following situations:

  Continuous random variable with mean

Let X be a continuous random variable with mean 13 and variance 6. Define the random variable W=13-6X. Answer the following questions.

  Change in stock price for strategy

Make a long butterfly spread and construct a table showing how profit (loss) and payoff vary with change in stock price for this strategy.

  What grade he will need to maintain to buy the car

If peter can keep his grade during whole academic career. What grade he will need to maintain to buy the car at the end.

  Youre prepared to make monthly payments of 225 beginning at

youre prepared to make monthly payments of 225 beginning at the end of this month into an account that pays 10 percent

  Sample representative of the population with respect

Is this sample representative of the population with respect to the number of pounds lost?

  Define the behavior of investors from different cultures

The sections on the endowment effect and biased self-attribution cited recent research on differing influences dependent on cultural background.

  Recession state with probabilities

Suppose your client is risk-averse but can invest in only one of the three securities, X, Y, or Z, in an uncertain world characterized as follows.

  How much would you be willing to pay in given conditions

You are willing to pay $25,000 now to purchase a perpetuity which will pay you and your heirs $2,200 each year, forever, starting at the end of this year.

  Why is this finding a puzzle

Merger Profit Acquiring-firm stockholders seem to benefit very little from takeovers. Why is this finding a puzzle? What are some of the reasons offered for it?

  Calculate the price of a european put option

You come across a European call that has 6 months to expiration and has an expiration price of $30 which is priced at $2 by the market.

  Calculate the common-sized balance sheet

Provide a brief analysis of what the ratio indicates for your company. Calculate the common-sized balance sheet and income statement (vertical analysis)

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