The capital budget of Creative Ventures Inc. is $1,000,000. The company wants to maintain a target capital structure that is 30% debt and 70% equity. The company forecasts that its net income this year will be $800,000. If the company follows a residual dividend policy, what will be its total dividend payment?
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The capital budget of Creative Ventures Inc. is $1,000,000. The company wants to maintain a target capital structure that is 30% debt and 70% equity. The company
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- Consider the following information which relates to a given company: Item 2019 Value Earnings Per Share $6.43 Price Per Share (Common Stock) $39.59 Book Value (Common Stock Equity) $62.96 million Total Common Stock Outstanding 2.84 million Dividend Per Share $3.52 Analysts expect that the company could maintain a constant annual growth rate in dividends per share of 5.8% in the future, or possibly 7.79% for the next 2 years and 5.29% thereafter. In addition, it is expected that the risk of the firm, as measured by the risk premium on its stock, to increase immediately from 8.38% to 10.52%. Currently, the risk-free rate is 5.85%. Required: Determine the new required return for the firm's stock. % (ROUND YOUR ANSWER TO 2 DECIMAL PLACES. FOR EXAMPLE: 17.23)G&M Motors is currently an all equity financed firm. It expects to generate EBIT of $30 million over the next year. Assume that G&M Motors’ EBIT is not expected to grow in the future and that all earnings are paid out as dividends. Currently G&M has 10 million shares outstanding and its stock is trading at $40.00 per share. G&M is considering changing its capital structure by borrowing $100 million at an interest rate of 2% and using the proceeds to repurchase shares at its current price ($40.00 per share). Assume perfect capital markets. After the re-capitalisation, G&M ʹs earnings per share (EPS) and the equity cost of capital are closest to: A. $2.90 and 14.55% B. $3 and 7.5% C. $3.73 and 9.3% D. $2.8 and 10.8%An analyst gathered the following information regarding Beta Corporation: Current dividend per share = $2.18 Next year's expected dividend growth rate of 30% is expected to decline linearly over the following 8 years to a long-term constant growth rate of 6%. Řequired rate of return on the company's stock is 11%. The value of the company's stock today is closest to: 1. 41.86 2.98.54 3.88.07
- You have just won the lottery. The state offers you an amortized payout of $200,000 at the end of each year for 30 years. The payout is taxable and the tax rate is 60%. You do not expect the government (who pays the payout) to go bankrupt. The risk-free rate is 9% per year and the total expected market return is 17%. What is the value of the lump-sum payment that would cause you to be indifferent between taking the lump-sum or the amortized payout?Wu of Troy, New York, has $5,000 that he wants to invest in the stock market. Ji is in college on a scholarship and does not plan to use the $5,000 or any dividend income for another five years, when he plans to buy a home. He is currently considering a small company stock selling for $25 per share with an EPS of $1.25. Last year, the company earned $900,000, of which $250,000 was paid out in dividends. What classification of common stock would you recommend to Ji? Calculate the P/E ratio and the dividend payout ratio for this stock. Round your answers to the nearest whole number c3.Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?At the end of 2011 Home Depot's total capitalization amounted to $29,031 million. In 2012 debt investors received interest income of $648 million. Net income to shareholders was $4,487 million. (Assume a tax rate of 35%.) Calculate the economic value added assuming its cost of capital is 10%. (Do not round intermediate calculations. Give your answer in millions rounded to 2 decimal places.)
- If an investor would like to sell short shares originally valued at $20,000 in which his/her cash contribution is $10,000, what is the stock value when the investor receives a margin call given the maintenance margin of 30%? The current stock value increases to $23,874 The current stock value increases to $23,077 The current stock value increases to $22,428 The current stock value decreases to $22,428What is the current price of Tummy Ache stock if it is expected to pay a dividend of $1.26 every quarter forever, the stock's expected return is 11.63% per year, and the next dividend is expected in 3 months? $43.34 (plus or minus 10 cents) $130.01 (plus or minus 10 cents) $10.83 (plus or minus 10 cents) $38.82 (plus or minus 10 cents) the answer cannot be obtained based on the given informationThe production department of Kerch Enterprises is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine which one has the best accounting rate of return on average investment. Machine A Estimated annual accounting income $45,500 Average investment $350,000 Machine B Machine C $67,500 $72,800 $450,000 $260,000 Which one has the best accounting rate of return on average investment (AKA average rate of return). A. Machine A C. Machine C B. Machine B D. Machines B and C have the same preferred payback period.