Question
A company operates two identical projects, each yielding annual cash flows of $75 million. The company has 100 million shares on issue and currently pays
A company operates two identical projects, each yielding annual cash flows of $75 million. The company has 100 million shares on issue and currently pays all its cash flows out as dividends. If the company decides to increase its dividend by 10 cents per share, and the cost of issuing new shares is 0.6%, calculate the impact on shareholder wealth of the company’s strategy. Assume a discount rate of 10%.
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Fundamentals of corporate finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
10th edition
978-1260013955, 78034639, 978-0078034633
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