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Consolidated Pasta is currently expected to pay annual dividends of $ 1 0 a share in perpetuity on the 2 . 6 million shares that
Consolidated Pasta is currently expected to pay annual dividends of $ a share in perpetuity on the million shares that are outstanding. Shareholders require a rate of return from Consolidated stock.
a What is the price of Consolidated stock?
Note: Do not round intermediate calculations.
b What is the total market value of its equity?
Note: Enter your answer in millions.
Consolidated now decides to increase next year's dividend to $ a share, without changing its investment or borrowing plans. Thereafter the company will revert to its policy of distributing $ million a year.
c How much new equity capital will the company need to raise to finance the extra dividend payment?
Note: Enter your answer in millions.
d What will be the total present value of dividends paid each year on the new shares that the company will need to issue?
Note: Enter your answer in millions.
e What will be the transfer of value from the old shareholders to the new shareholders?
Note: Enter your answer in millions.
f Is this figure more than, less than, or the same as the extra dividend that the old shareholders will receive?
a Stock price
b Market value of equity
c New equity
d Present value
e Transfer of value
f Is this figure more than, less than, or the same as the extra dividend that the old shareholders will receive?
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