Payout Policy for House of Haddock
Not what you're looking for?
House of Haddock has 5,000 shares outstanding and the stock price is $140. The company is expected to pay a dividend of $20 per share next year and thereafter the dividend is expected to grow indefinitely by 5% a year. The president, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainer will be used to repurchase stock.
A. What is the total value of the company before and after the announcement? What is the value of one share?
B. What is the expected stream of dividends per share for an investor who plans to retain his shares rather than sell them back to the company? Check your estimate of share vaue by discounting this stream of dividends per share.
Purchase this Solution
Solution Summary
A payout policy for the House of Haddock are examined.
Solution Preview
See word document attachment. Thanks for using brainmass.com We look forward to servicing your needs in the future.
a) Company value is unchanged at 5,000 x 140 = $700,000. The price for one share is ...
Purchase this Solution
Free BrainMass Quizzes
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Lean your Process
This quiz will help you understand the basic concepts of Lean.