Question

KMS Corporation has assets with a market value of ​$559 ​million, ​$41 million of which are cash. It has debt of ​$196 ​million, and 10 million shares outstanding. Assume perfect capital markets.

Please provide calculations and answers.

a. What is its current stock​ price?

b. If KMS distributes ​$41 million as a​ dividend, what will its share price be after the dividend is​ paid?

c. If​ instead, KMS distributes ​$41 million as a share​ repurchase, what will its share price be once the shares are​ repurchased?

d. What will its new market​ debt-equity ratio be after either​ transaction?

a. What is its current stock​ price?

KMS​ Corporation's current stock price is ​$ nothing per share. ​ (Round to the nearest​ cent.)

b. If KMS distributes ​$41 million as a​ dividend, what will its share price be after the dividend is​ paid?

If KMS distributes ​$41 million as a​ dividend, KMS​ Corporation's share price after the dividend is paid will be ​$ nothing per share. ​(Round to the nearest​ cent.)

c. If​ instead, KMS distributes ​$41 million as a share​ repurchase, what will its share price be once the shares are​ repurchased?

If​ instead, KMS distributes ​$41 million as a share​ repurchase, KMS​ Corporation's share price after the shares are repurchased will be ​$ nothing per share. ​(Round to the nearest​ cent.)

d. What will its new market​ debt-equity ratio be after either​ transaction?

After either​ transaction, the​ debt-to-equity ratio is nothing. ​(Round to two decimal​ places.)

Answer 1

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