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The Spector Company currently has 236,000 outstanding shares selling at $142 each. The firm is contemplating the declaration of a dividend of $4 at the
The Spector Company currently has 236,000 outstanding shares selling at $142 each. The firm is contemplating the declaration of a dividend of $4 at the end of the fiscal year that just began. Assume there are no taxes on dividends. Answer the following questions based on the Miller and Modigliani model. |
a. | What will be the price of the stock on the ex-dividend date if the dividend is declared? |
b. | What will be the price of the stock at the end of the year if the dividend is not declared? |
c. | If the company makes $6.1 million of new investments at the beginning of the period, earns net income of $3.5 million, and pays the dividend at the end of the year, how many shares of new stock must the firm issue to meet its funding needs? |
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