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What is the value and composition of portfolio

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Reference no: EM132842667

Imagine that Telephonic Industries has excess cash of $300,000 and is considering an immediate payment of this amount as an extra dividend. The firm forecasts that, after the dividend, earnings will be $450,000 per year. There are 100,000 shares outstanding. The cost of capital of the firm is 16.67%. Imagine that the firm offers to repurchase its existing stock at $30.

Consider the portfolio of investor X who owns 1000 shares. He didn't need any cash, at that time so he didn't sell any of the stock during the buy back.

What is the value and composition of her portfolio before the repurchase? What is the value and composition of her portfolio after the repurchase?

Reference no: EM132842667

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