Question: A firm has 50 million common shares outstanding on which
A firm has 50 million common shares outstanding, on which it pays a quarterly dividend of $0.20 per share. The firm’s capital structure also includes two million cumulative preferred shares with a $25 par value that yield 8 percent per year (or 2 percent per quarter). After making some bad loans in the sub-prime mortgage market, the firm suffered a big loss, and suspended its dividend payments on all forms of equity. Six months later, the company is once again in the black having earned $6 million (after tax), which it intends to pay as dividends. How much will the common shareholders receive per share?
Answer to relevant QuestionsThe common shares of a firm are currently trading at $10.00, while its preferred shares trade at par. Calculate the convertible premium on the preferred shares. What does this premium mean?Straight preferred shares issued by a firm have a discount rate of 8 percent per year, whereas these shares are yielding 6 percent on the $50 par value. The conversion value of these shares is calculated to be $40. Determine ...1. Which of the following statements is false?a. Financing total assets is called the financial structure decision.b. Capital structure is how invested capital is financed.c. The financial structure is $34,000 if the total ...A firm is going to finance a new project 100 percent with debt, through a new bond issue. Since the firm is using only debt to finance the project, the NPV of the project should be calculated using the cost of debt as the ...Provide two reasons why the cost of a security to a company differs from its required return in capital markets.
Post your question