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Now suppose that Rocksteady instead realizes higher than expected earnings of 9, 000. It decides to keep the dividend at 12 and use the remainder
Now suppose that Rocksteady instead realizes higher than expected earnings of 9, 000. It decides to keep the dividend at 12 and use the remainder to buy back shares. How many shares will be repurchased and at what price? What is the payoff to the remaining shareholders?
(25) Let Rocksteady Industries be an all-equity firm in a Modigliani-Miller world with 500 shares outstanding and a cost of equity of rE=0.15. Suppose that it has announced a dividend of 12 per share equal to its expected annual earningsStep by Step Solution
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