Question
Consider the following information to answer subsequent questions. AZ&Z has $10,000 excess cash. INPV=0, TOInc=TKG(=0%) The firm has 10,000 shares out and the current stock
Consider the following information to answer subsequent questions.
- AZ&Z has $10,000 excess cash. INPV=0, TOInc=TKG(=0%)
- The firm has 10,000 shares out and the current stock price is $5
The CFO is considering what to do with the cash:
- Do nothing
- Pay out via dividends
- Pay out via a share repurchase
You are an investor in AZ&Z; you have 1 share. Ignore distortions: agency, asymmetric information, signaling
- What is your total wealth if the firm does nothing with the cash?
- What is your total wealth if the firm pays dividends?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Quantitative Financial Risk Management
Authors: Constantin Zopounidis, Emilios Galariotis
1st Edition
1118738187, 978-1118738184
