Question

A firm's next-period market value of equity is $2.5 million and there are 100,000 shares outstanding, with K = 15%.
a. What is the current stock price if the firm pays $500,000 in cash dividends?
b. What is the number of shares outstanding if a firm spends its extra $500,000 to buy back shares at $30 per share instead of paying $500,000 in cash dividends?
c. What is the current stock price if a firm spends its extra $500,000 to buy back shares at $30 per share instead of paying $500,000 in cash dividends?



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  • CreatedFebruary 25, 2015
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