Gibson Co. has a current period cash flow of $1.1 million and pays no dividends. The present
Question:
The company is entirely financed with equity and has 600,000 shares outstanding.
Assume the dividend tax rate is zero.
a. What is the share price of the Gibson stock?
b. Suppose the board of directors of Gibson Co. announces its plan to pay out 50 percent of its current cash flow as cash dividends to its shareholders. How can Jeff Miller, who owns 1,000 shares of Gibson stock, achieve a zero payout policy on his own?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For 
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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