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# Accounting for Corporations

### Estimate current price of stock with growing dividends

7-5 A company currently pays a dividend of \$2 per share. It is estimated that the company's dividend will grow at a rate of 20% for the next two years, then the dividend will grow at a constant rate of 7% thereafter. The company's stock has a beta equal to 1.2, the risk free rate is 7.5% and the market risk premium is 4%.

### Dividend Expectation: Warr Corporation

7-1 Warr Corporation just paid a dividend of \$1.50 a share. The dividend is expected to grow 5% a year for the next 3 years and 10% a year thereafter. What is the expected dividend per share for each of the next 5 years?

### Perpetual Dividend Growth

A company just paid a dividend of \$1.80. If the dividends will grow at 6.2% per year and you require a return of 11.8%, what is the most you should be willing to pay for the stock?

### Dividend: Calculate dividend for year 4

Firm X paid an annual dividend of \$1.85 per share last year. Management just announced that future dividends will increase by 3 percent annually. What is the amount of the expected dividend in year 4? 1. 1.96 2. 1.91 3. 2.02 4. 2.08 5. 2.14

### Company ABC's earnings and dividends will grow at 0.5% monthly during the next five years.

Company ABC's earnings and dividends will grow at 0.5% monthly during the next five years. Its growth will stop after year 5. In year 6 and afterward, it will pay out all earnings as dividends. Assume next year's EPS is \$10 and the dividend is \$5 and the market capitalization rate is 9%. What is ABC's stock price?

### What advantages to the corporation and the stockholder do dividend reinvestment plans offer?

What advantages to the corporation and the stockholder do dividend reinvestment plans offer?

### Compute the present value of a Stock based on dividend payments

Firm X is expected to pay its first annual dividend 5 years from now. That payment will be \$3.10 a share. Starting in year 6, the company will increase the dividend by 2 percent per year. The required return is 15 percent. What is the value of this stock today? 1. \$11.86 2. \$12.09 3. \$13.63 4. \$14.66 5. \$15.71

### Dividends to Shareholders: Starbucks

Starbucks has 325,000 shares of cumulative preferred stock outstanding. The stock is supposed to pay \$2.00 in dividends per share each quarter. The company missed the last two quarterly payments on its preferred stock. What is the total amount of dividends it must pay to the preferred shareholders next quarter if it plans to a p

### General Machine currently pays a dividend of \$4 per share on its common stock. The dividend is expected to grow at 5% per year forever. Stocks with similar risk currently are priced to provide a 12% expected return. What is the intrinsic value of General Machine stock?

General Machine currently pays a dividend of \$4 per share on its common stock. The dividend is expected to grow at 5% per year forever. Stocks with similar risk currently are priced to provide a 12% expected return. What is the intrinsic value of General Machine stock?

### Stock Voting Shares for Hilton: guarantee a seat on the BOD

Hilton has 220,000 shares of stock outstanding with a current market value of \$34 a share. I own 40,000 of these shares. Next month, the election will be held to select three new members to the board of directors. The firm uses a cumulative voting system. How much additional money do I need to spend to guarantee that I

### Dispersed ownership structures and higher dividend payment

Why do firms with more-diverse shareholder bases typically pay higher dividends than private firms or public firms with more concentrated ownership structures? How are fixed dividends used as a bonding (commitment) mechanism by managers of firms with dispersed ownership structures and large amounts of free cash flow?

Question # P2 The Detroit Slugger Bat Company needs to raise \$30 million. The investment banking firm of Kaline, Horton, & Greenberg will handle the transaction. a. If stock is utilized, 1.8 million shares will be sold to the public at \$16.75 per share. The corporation will receive a net price of \$16 per share. What is th

### S. Young, Inc: What Dividend is Expected at Year End?

Assume that investors expect a 10% return on the stock of S. Young Inc. If it currently trades at \$40 per share on the New York Stock Exchange and its dividend is expected to grow at a constant rate of 7%, what dividend is anticipated at the end of the year?

### DIVIDENDS AND RETURN OF CAPITAL

1. On the day that the board of directors declares a dividend payable to common stockholders, which account in the books is DECREASED? A. cash B. dividend payable C. retained earnings D. BOTH dividend payable and retained earnings E. NONE of the above 2. On the day that the board of directors declares a dividend

### Calculating Stockholders` Expected Rate of Return

Butler Corp paid a dividend today of \$3.50 per share. The dividend is expected to grow at a constant rate of 8% per year. If Butler Corp stock is selling for \$75.60 per share, the stockholders' expected rate of return is ________. a. 12.63% b. 12.53% c. 13.00% d. 14.38%

### The directors of Caldwell Corp. are trying to decide whether they should issue par or no par stock.

The directors of Caldwell Corp. are trying to decide whether they should issue par or no par stock. They are considering three alternatives for their new stock, which they are assuming will be issued at \$8 per share. The alternatives are: (A) \$5 par value, (B) no par with a \$1 stated value, and (C) no par, no stated value. If 60

### A stock sells for \$40. The next dividend will be \$4 per share.

Constant-Growth Model. A stock sells for \$40. The next dividend will be \$4 per share. If the rate of return earned on reinvested funds is 15 percent and the company reinvests 40 percent of earnings in the firm, what must be the discount rate?

### Two-Stage Dividend Growth Model

Chartreuse County Choppers, Inc. is experiencing rapid growth. The company expects dividends to grow at 30% per year for the next 8 years before leveling off at 6% into perpetuity. The required return on the company's stock is 11%. If the dividend per share just paid was \$1, what is the stock price?

### Chartreuse County Choppers Inc.: Two-Stage Dividend Growth

Chartreuse County Choppers Inc. is experiencing rapid growth. The company expects dividends to grow at 25% per year for the next 9 years before leveling off at 6% into perpetuity. The required return on the company's stock is 12%. If the dividend per share just paid was \$1.05, what is the stock price?

### Stock Annualized After-Tax Return

You own a stock that will pay a dividend of \$1.75. The stock currently sells for \$22.46. You purchased this security 3 months ago for \$20.67. If you sell this security on the ex-dividend date, tomorrow, what is your annualized (quarterly compounded) after-tax return if you expect the stock price to drop by \$1.15? Assume a capita

### New issue of shares

Firm X has 100,000 shares of stock currently outstanding. Each share currently has a true value of \$60. Suppose the firm issues 20,000 shares of new stock at the following prices: (a) \$65, (b) \$55, and (c) \$30. The firm takes the funds raised in the issue and invests in securities (i.e., a 0 NPV project). What will be the effect

### Dividends, Retained Earnings, and Yields

Springsteen Music Company earned \$820 million last year and paid out 20 percent of earnings in dividends. a. By how much did the company's retained earnings increase? b. With 100 million shares outstanding and a stock price of \$50, what was the dividend yield? (Hint: First compute dividends per share.)

### Evaluating stock today and in a year

The Robert Phillips Co. currently pays no dividend. The company is anticipating dividends of \$0, \$0, \$0, \$.10, \$.20, and \$.30 over the next 6 years, respectively. After that, the company anticipates increasing the dividend by 4 percent annually. The first step in computing the value of this stock today, is to compute the value o

### Stock Market Values with Perpetual Annual Dividend

Mark Walker Inc plans to issue preferred stock with a perpetual annual dividend of \$2 per share and a par value of \$25. If the required return on this stock is currently 8%, what should be the stock's market value?

### A share of common stock has just paid a dividend of \$2.00. If the expected long-run growth rate of this stock is 7%, and if investors require an 11% rate of return, what is the price of the stock?

A share of common stock has just paid a dividend of \$2.00. If the expected long-run growth rate of this stock is 7%, and if investors require an 11% rate of return, what is the price of the stock?

### Constant Growth Rate Discounted Dividend Model

The Constant Growth Corporation (CGC) has expected earnings per share (E1) of \$5. It has a history of paying cash dividends equal to 20% of earnings. The market capitalization rate for CGC's stock is 15% per year, and the expected ROE on the firm's future investments is 17% per year? Using the constant growth rate discounted div

### Stocks: Equity Positions and Dividend Yields

Please help answer the following problem. Provide step by step calculations. 1. You own 1000 shares of XYZ Corp. and the company is about to pay a 25% stock dividend. The stock currently sells for \$100 per share. What will be the number of shares that you hold and the total value of your equity position after the dividend is

### Integrated Potato Chips paid a \$1 share dividend yesterday.

Integrated Potato Chips paid a \$1 share dividend yesterday. You expect the dividend to grow steadily at a rate of 4 percent a year. A. What is the expected dividend in cash of the next 3 years. B. If the discount rate for the stock is 12 percent, at what price will the stock sell? C. What is the expect stock price 3 yea

### Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines.

Please see the attached file. 1.Assume the anticipated growth rate in dividends is constant for Fly-By-Nite Airlines. The expected value of the firm`s stock at the end of four years (P4) is I. D5 / (r-g) II. P0 x (1+g)4 III. D0 x (1+g)/(r-g) a. I only b. II only c. I and II only d. I and III only e. I, II, and III

### In 2003, David Corp. acquired 15,000 shares of its own \$1 par value common stock at \$18 per share.

I need help with my study guide for my upcoming final. Thanks. Please see the attached file. Choose the best answer for each of the following questions and enter the identifying letter on your MS Excel worksheet. 1. In 2003, David Corp. acquired 15,000 shares of its own \$1 par value common stock at \$18 per share.