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Karkas Cold Cuts Inc. has $20 of cash and analysts expect the company to generate $10 of free cash flow at the end of the
Karkas Cold Cuts Inc. has $20 of cash and analysts expect the company to generate $10 of free cash flow at the end of the current year. The same amount of free cash is expected annually in perpetuity. Karkas is all equity financed and stockholders require a return of 10%. There are 200 shares outstanding. Karkas is considering a cash dividend of $0.10 per share. If it pays the dividend, then what will the stock price be after the dividend? Question 14 options: a) $0.40 b) $0.50 c) $0.30 d) $0.60
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