Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need help with question E, it is incorrect. Chapter 17 Homework Consolidated Pasta is currently expected to pay annual dividends of $10 a share in

image text in transcribed
image text in transcribed
need help with question E, it is incorrect.
Chapter 17 Homework Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 24 million shares that are outstanding. Shareholders require a rate of return of 8% from Consolidated stock . What is the price of Consolidated stock? (Do not reund intermediate calculations Slock prices 125 b. What is the total market value of its equity? (Enter your answer in milli Market value of equity 300 million Consolidated now decides to increase next year's dividend to $20 share without changing senestment or borrowing plans Thereafter the company will revert to its policy of distributing $10 million a yea c. How much new equity capital will the company need to raise to finance their dividend paymene (Enter your answer in millions.) New equity 24 milion d. What will be the total present value of dividend padach answer in millions.) combe w need to stue (Enter your Presenta 4 million Consolidated now decides to increase next year's dividend to $20 a share, without changing its investment or borrowing plans Thereafter the company will revert to its policy of distributing $10 million a year. points c. How much new equity capital will the company need to raise to finance the extra dividend payment? (Enter your answer in millions.) W New equity 24 d. What will be the total present value of dividends paid each year on the new shares that the company will need to issue? (Enter your answer in millions.) values 24 milion e. What will be the transfer of value from the old shareholders to the new shareholders (Enter your answer in millions.) Transfer of values 11 million Is this figure more than less than or the same as the e that the shareholders will receive More than Less than The some

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance A Focused Approach

Authors: Michael C. Ehrhardt, Eugene F. Brigham

8th Edition

0357714636, 9780357714638

More Books

Students also viewed these Finance questions

Question

7. What are the main provisions of the FMLA?

Answered: 1 week ago

Question

2. Do small companies need to develop a pay plan? Why or why not?

Answered: 1 week ago