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Question: a. Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 1.2 million shares that are outstanding. Shareholders require a 8% rate of return from Consolidated stock. What is the price of Consolidated stock? Stock price $
b. What is the total market value of its equity? (Enter your answer in millions.) Market value of equity $ million Consolidated now decides to increase next year's dividend to $20 a share, without changing its investment or borrowing plans. Thereafter 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 finance the extra dividend payment? (Enter your answer in millions.) New equity $ million
d. What will be the total present value of dividends paid each year on the new shares that the company will need to issue? (Enter your answer in millions.) Present value $ million
e. What will be the transfer of value from the old shareholders to the new shareholders? (Enter your answer in millions.) Transfer of value $ million
f. Is this figure more than, less than, or the same as the extra dividend that the old shareholders will receive? More than Less than The same
What is the purpose of the Federal Reserve? Explore and discuss its economic goals. How does the Fed pursue its economic goals? What is behavioral finance?
You try to price the put option on XYZ corp. The current stock price of XYZ is $100/share. The risk-free rate is 3%.
1. Provide an example of a Sunk Cost from your firm. 2. Provide an example of an Opportunity Cost that would arise in your firm when considering a new project.
By the 2000s, what significant changes had taken place in the mortgage market? What is a "subprime" borrower? What is an "Alt-A" borrower?
How would you define economic exposure to exchange risk?
What is the after-tax cost of preferred stock that sells for $10.00 per share and offers a $1.20 dividend when the tax rate is 35%?
The inventory has a book value of $53,300 and an estimated market value of $71,200. If the store compiled a balance sheet as of today, what would be the book value of the current assets?
The stated rate of interest is 10%. Which form of compounding will give the highest effective rate of interest? a. annual compounding b. daily compounding c. continuous compounding d. It is impossible to tell without knowing the term of the loan.
find the amount that should be set aside today to yield the desired future amountfuture amount needed 14000interest
Interaction between Bond and Money Markets: -How would you rebalance your portfolio between bonds and money market securities?
(a) What is each alternative's IRR? (b) If the cost of capital for both methods is 9 percent, which method should be chosen? Why?
What would be the payment if you choose to elect to have a weekly plan? (Hint: assume a 52-week year and for this question don't simply divide your monthly)
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