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What is the total market value of its equity

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Reference no: EM133011122

Problem - Consolidated Pasta is currently expected to pay annual dividends of $10 a share. In perpetuity on the 2.5 million shares that are outstanding. Shareholders require a 10% rate of return from Consolidated stock.

a. What is the price of Consolidated stock?

b. What is the total market value of its equity?

Consolidated now decides to Increase next year: dividend to $20 a share, without changing Its investment or borrowing plans. There after the company will revert to its policy of distributing $10 million a year.

c. How much new equity capital will the company need to raise to ?nance the extra dividend payment?

Reference no: EM133011122

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