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What is the value and composition of portfolio

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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%.

Consider an investor who owns 1000 shares of Telephonic's stock. What is the value and composition of her portfolio after the dividend is paid? To describe the composition of the portfolio, specify the value in cash and the value of the stock.

Reference no: EM132842678

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