Randy Corporation has a capital budget of 391,000,000 and and a Net Income of 10,000,000. If Randy's target equity fraction is 27.6%, what should Randy's dividend be under the residual dividend model?
2. Due to a declining stock price and the possibility of being delisted from an exchange, Hubbell corporation undergoes a reverse 4 to 1 stock split. If Hubbell initially has 434,000,000 shares, how many shares does Hubbell have now?

3. Spraggins Inc. has a new capital budget for next year of 1,441,000 and has a target debt fraction of 0.60. If the firm following the residual dividend policy and wants to retain its target capital structure, what must its retained earning be next year?

4. Ebeling Inc. undergoes a 2 for 1 stock split. If the company's stock trades for $260.03 per share before the split and the value of the company does not change due to the split, what is Ebeling's new stock price?

Round the answer to two decimals.

5. A firm has equity with market value $100 million and debt with market value at $70 million. The debt pays perpetual expected coupons of $3.5 million annually.

The above numbers are prior to a stock buyback being announced.

The firm uses some of its cash buyback stock on of $20 million. As a result of the fall in its cash, the expected coupon payment to debt reduce to $3.4 million (expected payments is the probability weighted future coupons, and the probability that in some future states of the world the firm would default has increased due to the the stock buyback). Also the rate of discount Rd for expected coupons paid to debt rises to 5.15%.

Assume Modigliani-Miller is true (which also means there are no taxes).

What will be the value of Equity after the stock buyback? (Do not include the $20 million that is paid to the Equity holders.)

Please write the answer in millions rounded to the whole number.

6. Suppose we live in a world in which Modgliani Miller is true, that is no information or tax issues and capital structure is irrelevant.

A firm currently has 1,000 shares outstanding, each with a price of $14.12.

The firm announces that it will pay a dividend of $2.26 per share. What will be the price of a share ex-dividend (that is after dividend has been paid)?

Round the answer to two decimals.

7. Suppose we live in a world in which Modgliani Miller is true, that is no information or tax issues and capital structure is irrelevant.

A firm currently has 1,000 shares outstanding, each with a price of $290.

The firm announces a 1 for 5 "Rights Issue" of new stock, that is each stock holder would have the right to buy 1 stock for 5 stocks currently held. The price at which the new stock will be sold to existing shareholders will be $180.

Assume all shareholders act rationally in making their purchase decision, that is they purchase the Rights stock if the price they will pay will be lower than the price of the stock after the Rights issue is completed.

What will the price of the stock be after the Rights issue is completed?

Round the answer to two decimals.

8. Suppose we live in a world in which Modgliani Miller is true, that is there are no information or tax issues and capital structure is irrelevant.

A firm currently has 1,000,000 shares outstanding, each with a price of $87.83.

The firm is planning a sale of debt of face value $10,000,000. It's investment bankers calculate that the debt will sell for $9,200,000 in the market (lower than full face value as it's coupon rate will be lower than its rate of discount).

The firm will use the proceeds from the sale of debt to repurchase equity. What will be the price per equity after the debt has been sold and shares repurchased?

Assume all shareholders act rationally in making their purchase decision, that is they purchase the Rights stock if the price they will pay will be lower than the price of the stock after the Rights issue is completed.

What will the price of the stock be after the Rights issue is completed?

Round the answer to two decimals.