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# Dividends, Stock Repurchase and Policy

### Microsoft motives for accumulating and holding cash; consider working capital levels

Microsoft Corporation has accumulated \$40 billion in cash and short-term marketable securities; more than Ford, Exxon Mobil, and Wal-Mart combined. Despite an economic slowdown, the company's core business still generates about \$1 billion per month in cash. With this much cash, Microsoft is almost as much an investment firm as i

### Regular cash dividends are cash payments by a company to its shareholders

In 2 -3 paragraphs please explain the following: 1. Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal to you? Explain. 2. Explain a stock dividend and further explain if you would prefer it to a cash dividend. 3. What are stock splits and how desirable are they? Please use APA fo

### Common Stock Dividend, Rate of return, dividend

The Medical Equipment Company paid \$2.25 common stock dividend last year. The company's policy is to allow its dividend to grow at 5 percent per year indefinitely. What is the required rate of return if value of the stock is 78.75?

### ABC Corp Dividend Policy: Compute using constant payout and fixed dollar payout

ABC Corp. has had the indicated earnings per share (EPS) over the last 3 years: Year EPS 2003 \$3.00 2004 \$2.00 2005 \$1.00 a) If the company's dividend policy was based on a constant payout ratio of 50%, determine the annual dividend for each year. b) If the firm's dividend policy was based on a fixed dol

### Free Cash Flow after dividends and repurchase of stock

A). A firm generated \$143 million in free cash flow and paid a net dividend of \$49 million to shareholders. How much was paid to debtholders and debt issuers? b) A firm paid a dividend to shareholders of \$162 million and repurchased a stock for \$53 million. There were no share issues. The firm received net cash of \$86 millio

### What value would place on the stock at a rate of return of 18%? Would your value change if you held the stock for only 3 years?

ABC currently pays a dividend of \$2 a share and the dividend will grow at 15\$ per year for 3 years, and then at 10% for the next 3 years, later it is expected to grow at 5% forever. 1)What value would place on the stock at a rate of return of 18%? 2)Would your value change if you held the stock for only 3 years? Please ex

### Articulation of the financial statements mean that the balance sheet, income statement, and statement of stockholders equity must tie together and tell the same story.

1. (True or False) Articulation of the financial statements mean that the balance sheet, income statement, and statement of stockholders equity must tie together and tell the same story. 2. (Circle one) Dividends paid by Corporation A usually (increases or decrease) the stockholder's equity of Corporation A over time?

### Financial Analysis Case Study

Please see the attached file. Case Study Donna Jamison, a graduate of the University of Tennessee with 4 years of banking experience, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of electronic calculators. The company doubled its plant capacity, opened new sales of

### Repurchase of Shares

A firm with 100 million shares outstanding repurchased 10 million shares to the market price of \$20 per share. What is the total market value of the equity after the repurchase? What is the per-share value after the repurchase?

Questions 1. Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year. Is Georgia correct? Explain. 7. 1. What are long-term liabilities? Give two examples. 2. What is a bond? 8. Contrast these types of bonds: 1. Secured and unsecured. 2. Convertible and callable. 19. Valen

### Emergency

As part of a Careers in Accounting program sponsored by accounting organizations and supported by your company, you will be taking a group of high-school students through the accounting department in your company. You will also provide them with various materials to explain the work of an accountant. One of the materials you wil

### Dividend Policy: Drew Financial Associates

1. Drew Financial Associates currently pays a quarterly dividend of 50 cents per share. This quarter's dividend will be paid to stockholders of record on Friday, February 22, 2007. Drew has 200,000 common shares outstanding. The retained earnings account has a balance of \$15 million before the dividend, and Drew holds \$2.5 milli

### D. Paul Inc.: If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be?

D. Paul Inc. forecasts a capital budget of \$725,000. The CFO wants to maintain a target capital structure of 45% debt and 55% equity, and it also wants to pay dividends of \$200,000. If the company follows the residual dividend policy, how much income must it earn, and what will its dividend payout ratio be? Select the correc

### Alcoa's new dividend policy: Discuss and calculate new dividend

Alcoa recently announced a new dividend policy. The firm said it would pay a base cash dividend of 40 cents per common share each quarter. In addition, the firm said it would pay 30% of any excess in annual earnings per share above \$6.00 as an extra year-end dividend. a. If Alcoa earns \$7.50 per share next year, what percent

### Residual dividend policy and various scenarios

Mary's Mugs is evaluating its dividend policy. What would the differences be with a residual policy vs cash dividends? Capital budget \$10,000,000 Desired capital structure Debt 40% Equity 60% Expected net income \$7,000,000 Outstanding shares 5,000,000 Last annual dividend per share \$0.

### Penn Schumann, Inc: Holding too much cash

See attached file for balance sheet. George Liu, the CEO of Penn Schumann was a creature of habit. Every month he and Jennifer Rodriquez, the company's chief financial officer, met for lunch and an informal chat at Pierre's. Nothing was ever discussed until George had finished his favorite escalope de foie gras chaude. At

### Sunny Fruit: Calculate stockholders' equity, income tax, dividend, fixed asset purchases

B1. (Financial statements) Consider the following financial information for Sunny Fruit Co. Balance Sheet, December 31 (Figures in millions of dollars) LIABILITIES AND LATEST PREVIOUS STOCKHOLDERS' LATEST PREVIOUS ASSETS YEAR YEAR EQUITY YEAR YEAR Current assets \$400 \$200 Current liabilities \$150 \$195 Net fixed assets 6

### Transaction Reporting

Flesher Corporation was authorized to issue 100,000 shares of \$5 par common stock and 50,000 shares of \$50 par, 5%, cummulative preferred stock. Flesher Corporation completed the following transactions during its first two years of operation: 2009 Jan 2 Issued 15,000 shares of \$5 par common stock for \$8 per share. 15 Iss

### Dividends, Stock Repurchase and Policy

1.When a firm pays a stated dollar dividend and adjusts the payment as earnings increase, its dividend policy can be called 1. 1. a target dividend-payout ratio policy. 2. 2. a low-regular-and-extra dividend policy. 3. 3. a regular dividend policy. 4. 4. a constant-payout-ratio dividend policy. 2.Tangshan

### What is (are) true regarding the signaling view of dividend policy

5. Which of the following statements is (are) true regarding the signaling view (aka informational content) of dividend policy? a. Stock market (prices) generally react positively to dividend increases (above expected) b. Stock market (prices) generally react positively to dividend decreases (cuts) c. Stock market (prices)

### Is dividend policy affected by a firm's great ideas and projects?

3. If a firm has a lot of great ideas and projects to invest in, the firm would prefer which dividend policy below? a. Low dividend payout b. High dividend payout c. Either, since dividend policy has nothing to do with capital budgeting (projects the firm is investing in)

### A stock repurchase may be a signal of what?

1. A stock repurchase may be a signal that a. a firm's stock is overvalued b. a firm's stock is undervalued c. a firm is short on funds d. a firm's bonds are overvalued e. none of the above are accurate

### Financial Statement Analysis: business decisions using each of the statements

1. What does the income statement tell you about the company? 2. What does the balance sheet tell you about the company? 3. What does the statement of cash flow tell you about the company? 4. What business decisions could be made using each of these financial statements? 5. What information is provided in the statements that

### Dividend Policy Problems

Recall that Miller Modigliani 1961 on dividends says they are not relevant to firm value if the firm's target debt/equity ratio is fixed and investments do not change. What if we change investments or capital structure? Then, dividends could alter firm value to the shareholders. Assume the Base Case Firm has 100 shares at \$

### Cost of capital/capital structure/dividend policy

Problem 30 [(EBIT -26-30)(1-.4) - 2] /10 = [(EBIT -26)(1-.4) -2)] /14 After the algebra, you should get an answer of 134.33 University technologies, Inc. (UTI) has a current capital structure consisting of 10 million shares of common stock, \$200 million of first-mortgage bonds with a coupon interest

### Kudrow stock just paid a dividend of \$4.76 per share and plans to pay a dividend of \$5 per share next year

Kudrow stock just paid a dividend of \$4.76 per share and plans to pay a dividend of \$5 per share next year, which is expected to increase by 3 percent per year subsequently. The required rate of return is 15 percent. The value of Kudrow stock, according to the dividend discount model, is \$?

### Reporting and analyzing equity

Journal entries (where to debit/credit which account and why, why certain entries are adjusted because of activity in other accounts) Problem 11-2A: Cash dividends, treasury stock, and statement of retained earnings L.O. C2, C4, P2, P5 Kohler Corporation reports the following components of stockholders' equity on December 31

### Financial statement analysis

Using the financial statements of Landry's Restaurants located in Appendix A of the text, Fundamentals of Financial Accounting 1st ed., by Phillips, Libby, and Libby, compute the following ratios for 2002 and 2003: a. Earnings per share b. Return on assets c. Current ratio d. Times interest earned e. Asset turnover f. Debt

### Capital structure and dividend policy MC problem

If a firm adheres strictly to the residual dividend policy, a sale of new common stock by the company would suggest that a)The dividend payout ratio has remained constant b)The dividend payout ratio in increasing c) No dividneds were paid during the year, d) The dividend payout ratio is decreasing

### Capital Structure and dividend policy problem

Which of the following is correct? a)If a company put in place a 2-for-1 stock split, its stock price should roughly double. b)Share repurchases are taxed less favorably than dividends; this explains why companies typically pay dividends and avoid share repurchases. c) Very often, a company's stock price will rise when it a