Weyerhaeuser, the forest products producer, traded at $42 at the beginning of 1996. Its cost of equity

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Weyerhaeuser, the forest products producer, traded at $42 at the beginning of 1996. Its capital, calculated with the CAPM, is 11.5 percent. It is expected to pay dividends of $1.60 per share in 1996 and 1997. Straightforward calculations (as in Exercise E3.11) give it an expected price at the end of 1997 of $48.83 per share. Suppose the company had announced that, instead of paying a cash dividend, it would make share repurchases in 1996 and 1997 equal to the amount of the total annual dividend. It had 198 million shares outstanding at the end of 1995. What now would you expect the per-share price to be at the end of 1997?

Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...

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Question Posted: Mar 17, 2012 06:13 AM

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Weyerhaeuser, the forest products producer, traded at $42 at the beginning of 1996. Its cost of equity

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