The Mann Company belongs to a risk class for which the appropriate discount rate is 10...

The Mann Company belongs to a risk class for which the appropriate discount rate is 10 percent. The company currently has 240,000 outstanding shares selling at $150 each. The firm is contemplating the declaration of a $4 dividend at the end of the fiscal year that just began. Assume there are no taxes on dividends. Answer the following questions based on the Miller and Modigliani model, which is discussed in the text.

a.	What will be the price of the stock on the ex-dividend date if the dividend is declared? (Do not round intermediate calculations.)
b.	What will be the price of the stock at the end of the year if the dividend is not declared? (Do not round intermediate calculations.)
c.	If the company makes $6.5 million of new investments at the beginning of the period, earns net income of $3.9 million, and pays the dividend at the end of the year, how many shares of new stock must the firm issue to meet its funding needs? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)


a.	Price of the stock	$
b.	Price of the stock	$
c.	Number of shares

Solutions

Expert Solution

jeff jeffy answered 7 months ago

Next > < Previous

Related Solutions

use Excel : The Mann company belongs to a risk class for which the appropriate discount...

use Excel : The Mann company belongs to a risk class for which the appropriate discount rate is 10%. The company currently has 260,000 outstanding shares selling at $107 each. The firm is contemplating the declaration of a $4 dividend at the end of the fiscal year that just began. Assume there are no taxes on dividends. Answer the following questions based on the Miller and Modigliani model, which is discussed in the text. A. What will be the price...

ABC Ltd. belongs to a risk class for which the appropriate capitalization rate is 10%. It...

ABC Ltd. belongs to a risk class for which the appropriate capitalization rate is 10%. It currently has outstanding 5,000 shares selling at TZS.100 each. The firm is contemplating the declaration of dividend of TZS .6 per share at the end of the current financial year. The company expects to have net income of TZS.50,000 and has a proposal for making new investments of TZS.100,000. Show that under the MM hypothesis, the payment of dividend does not affect the value...

1)levothyroxine belong to which class 2) promethazine belongs to which class 3) Amiodarone belongs to which...

1)levothyroxine belong to which class 2) promethazine belongs to which class 3) Amiodarone belongs to which class

Which of the following equations is correct? A. Discount rate = Risk-free rate – Risk premium...

Which of the following equations is correct? A. Discount rate = Risk-free rate – Risk premium B. Discount rate = Risk-free rate ? Risk premium C. Discount rate = Risk-free rate ÷ Risk premium D. Discount rate = Risk-free rate + Risk premium

An appropriate discount rate to value projects in an unlevered company is Select one: a. The...

An appropriate discount rate to value projects in an unlevered company is Select one: a. The cost of debt b. The weighted average cost of capital c. The risk free rate of interest d. The cost of equity

Assume the appropriate discount rate is 8%. What is the value 10 years from today of...

Assume the appropriate discount rate is 8%. What is the value 10 years from today of an annuity that makes payments of $5,000 per year if the first payment is made 11 years from now and the last payment is made 18 years from now?

An investment will pay you $16,000 in 7 years. The appropriate discount rate is 10 percent...

An investment will pay you $16,000 in 7 years. The appropriate discount rate is 10 percent compounded daily. What is the present value?

Stocks A company has a constant growth rate of 5%. The company's risk adjusted discount rate...

Stocks A company has a constant growth rate of 5%. The company's risk adjusted discount rate is 7%. The company has a $2 dividend. What is the per share value of the stock? Bonds Calculate the value of each of the bonds below. Interest is paid semi-annually. Bond Par Value Years to Maturity Coupon Interest Rate Required Return Bond #1 1000 25 10% 12% Bond #2 1000 15 6% 6% Bond #3 500 10 7% 10%

Price a 10% coupon $1000 face value, 20-year bond if the appropriate discount rate is 8%...

Price a 10% coupon $1000 face value, 20-year bond if the appropriate discount rate is 8% for the first 10-years and 6% for the second 10-years. Show your return in dollars and percent if you hold this bond for 4-years. (Note: show all work and do not use a finance calculator.)

What are the purposes of determining to which social class a person or occupation belongs? How...

What are the purposes of determining to which social class a person or occupation belongs? How does class background, or current class position influence individual actions?

Subjects