A firm’s shares currently sell for $3.50 with 4 million shares outstanding. The firm plans to reverse split its stock by combining two shares into one share. If the price after this reverse split is $6.52, have shareholders gained or lost value? How much value is gained or lost? ( Consider shareholder value to be the market capitalization, which equals the number of shares outstanding multiplied by the stock price.)
Answer to relevant QuestionsSunshine Pageants decides that it will use a Dutch auction to repurchase 2 million shares. Investors have submitted the following bids on the price and quantity they are willing to sell shares to the firm: Price ($) ...Well-Bred Service Company earned $50,000,000 during 2012 and paid $20,000,000 in dividends to the holders of its 40 million shares. If the current market price of Well-Bred’s stock is $31.25, calculate the following: (a) ...Hole Foods Donuts, Inc. has generated profits of $2 per share for many years and has consistently paid 100% of those profits to shareholders via a dividend. Investors do not expect Hole Foods Donuts to grow in the future. ...Briefly describe the following popular growth targets: (1) Accounting-based return on investment (ROI), (2) Economic value added (EVA®), (3) Target growth rate of sales or assets. Which is most widely used, and why? How is a cash budget different from a set of pro forma financial statements? Why do you think that firms typically create cash budgets at higher frequencies than they create pro forma financial statements?
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