Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ques. 2 KMS Corporation has assets with a market value of $500 million, $50 million of which are cash. It has debt of $200 million,

Ques. 2 KMS Corporation has assets with a market value of $500 million, $50 million of which are cash. It has debt of $200 million, and 10 million shares outstanding. Assume perfect capital markets.

a. What is its current stock price?

b. If KMS distributes $50 million as a dividend, what will its share price be after the dividend is paid?

c. If instead, KMS distributes $50 million as a share repurchase, what will its share price be once the shares are repurchased?

d. What will its new market debt-equity ratio be after either transaction?

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_2

Step: 3

blur-text-image_3

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

Airline Management Finance

Authors: Victor Hughes

1st Edition

1138610690, 978-1138610699

More Books

Students also viewed these Finance questions