DOLAN INC is a large multinational conglomerate operating predominantly in the USA, the UK, and Hong...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
DOLAN INC is a large multinational conglomerate operating predominantly in the USA, the UK, and Hong Kong. They have both ordinary and preference shares listed on each of the major stock exchanges. That is, the S&P500, the FTSE 350, and the Hang Seng Indexes. DOLAN INC's financial statements for 2020 report earnings of $150m, £148.98m and HK$146.95m in the US, UK, and Hong Kong respectively. DOLAN INC has 25 million class A ordinary shares outstanding on the S&P500 has just paid total dividends on these stocks of $55m. This dividend payment is anticipated to remain constant for the next 6 years and then there will be no dividend payment from year 7 onward. The required rate of return demanded by investors in the US market is 8%. DOLAN INC has 15 million class A ordinary shares outstanding on the FTSE 350 has just paid a dividend of £1.00 per share, dividend growth is expected to be 2% per annum over the next 5 years. From year 6 onwards, dividend growth will change to 10% per annum indefinitely. The required rate of return demanded by investors in the UK market is 12%. DOLAN INC has 25 million ordinary shares outstanding on the Hang Seng is expected to pay a dividend next period of HK$15 with dividends growing at 5% per annum for the next 5 years (that is dt+1=HK$15, note that this value already includes dividend growth). Thereafter, there will be no dividend payments and the cost of capital to DOLAN INC on this market is 9%. Required: a) Calculate the price of DOLAN INC's ordinary shares on each stock market. [60 marks] b) Calculate the price to earnings ratios for each of DOLAN INC's ordinary shares. [15 marks] c) Define all three-forms of market efficiency and outline the real-world implications of each form. [25 marks] DOLAN INC is a large multinational conglomerate operating predominantly in the USA, the UK, and Hong Kong. They have both ordinary and preference shares listed on each of the major stock exchanges. That is, the S&P500, the FTSE 350, and the Hang Seng Indexes. DOLAN INC's financial statements for 2020 report earnings of $150m, £148.98m and HK$146.95m in the US, UK, and Hong Kong respectively. DOLAN INC has 25 million class A ordinary shares outstanding on the S&P500 has just paid total dividends on these stocks of $55m. This dividend payment is anticipated to remain constant for the next 6 years and then there will be no dividend payment from year 7 onward. The required rate of return demanded by investors in the US market is 8%. DOLAN INC has 15 million class A ordinary shares outstanding on the FTSE 350 has just paid a dividend of £1.00 per share, dividend growth is expected to be 2% per annum over the next 5 years. From year 6 onwards, dividend growth will change to 10% per annum indefinitely. The required rate of return demanded by investors in the UK market is 12%. DOLAN INC has 25 million ordinary shares outstanding on the Hang Seng is expected to pay a dividend next period of HK$15 with dividends growing at 5% per annum for the next 5 years (that is dt+1=HK$15, note that this value already includes dividend growth). Thereafter, there will be no dividend payments and the cost of capital to DOLAN INC on this market is 9%. Required: a) Calculate the price of DOLAN INC's ordinary shares on each stock market. [60 marks] b) Calculate the price to earnings ratios for each of DOLAN INC's ordinary shares. [15 marks] c) Define all three-forms of market efficiency and outline the real-world implications of each form. [25 marks]
Expert Answer:
Answer rating: 100% (QA)
a Calcul ate the price of D OL AN INC s ordinary shares on each stock market 60 marks ANS WER The price of D OL AN INC s ordinary shares on the S P 500 is 110 71 on the F TS E 350 is 74 07 and on the ... View the full answer
Related Book For
Taxes and Business Strategy A Planning Approach
ISBN: 9780132752671
5th edition
Authors: Myron Scholes, Mark Wolfson, Merle Erickson, Michelle Hanlon
Posted Date:
Students also viewed these accounting questions
-
The ABC Corporation is a large multinational company that has facilities (both manufacturing and distribution) located in many U.S. states and in overseas countries. The firms long serving chief...
-
McCain Foods Limited is a large multinational private company generating in excess of $6 billion in sales. It produces both frozen and non-frozen food products and makes one-third of the frozen...
-
Universal Auto is a large multinational corporation headquartered in the United States. For segment reporting purposes, the company is engaged in two businesses: production of motor vehicles and...
-
I need help with the 10-column worksheet. When I do the balance sheet the difference of my balance numbers do not equal my net income when it should. My net income is correct since the books states...
-
Would you expect the fracture toughness of quenched and tempered aluminum bronze to be high or low? Would there be a difference in the resistance of the alloy to crack nucleation compared with crack...
-
(+)-Fenchone is a terpenoid that can be isolated from fennel oil. (±)-Fenchone has been synthesized through the following route. Supply the missing intermediates and reagents. CO2Me CO2Me...
-
Consider a boundary layer with no external pressure gradient (a flat plate). Then, from the Prandtl boundary-layer equation, deduce that \[\mu \frac{d^{2} v_{x}}{d y^{2}}=0 \text { at } y=0\] Now...
-
Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 40 percent tax bracket. a. Compute its cash flow using the following format....
-
You are considering a project that requires a capital investment of $100 and will last for three years. Economical depreciation is straight line over 3 years (33.3% in each of the 3 years)) while tax...
-
A randomized controlled trial comparing two drugs for treating insomnia is said to have 85% power to detect a 20% relative reduction (RR=0.80) in sleep problems nine months following treatment at the...
-
Bayshore Associates is considering several capital investment decisions before investing in one that would have maximum return. Compute the following scenarios to select the best investment: a. The...
-
Please help to solve for 2020 actuals Acme Corporation Income Statement for the Year Ended December 31, 2020 Sales revenue $ 160,000 Less: Cost of goods sold 106,000 Gross profits $ 54,000 Less:...
-
In 1 Earth year, how many orbits (trips around the Sun) will Mercury complete? What fraction of an orbit will Neptune accomplish? Explain.
-
Evaluate logistics as a supply chain component, including how to measure performance, and key strategies to improve effectiveness. Chose one of the following subjects to address in this week's...
-
Evaluate the feasibility of applying blockchain technology to an organization's supply chain. assess blockchain technology and its applicability to supply chain management. Consider how the...
-
Gary is a 42-year-old Black American engineer at a local firm. He has always been a high achiever and can push himself hard. In the past year, he was in a serious MVA when a drunk driver hit his car....
-
To identify the types of systems that provide a strategic advantage to their firms, select the list that contains all the questions managers should ask. What is the structure of the industry in...
-
The test statistic in the NeymanPearson Lemma and the likelihood ratio test statistic K are intimately related. Consider testing H 0 : = 0 versus H a : = a , and let * denote the test statistic...
-
Under what general circumstances is a tax- free acquisition structure preferable? Consider specifically the tax attributes and tax status of the target corporation and the targets shareholders. Also...
-
What is the meaning of the term overfunded in terms of a pension plan? What are the advantages and disadvantages to the corporation and its employees of an overfunded pension plan?
-
A taxpayer works at a corporation nearing the end of its fiscal year. The company has had a very successful (profitable) year and has decided to award the employee a cash bonus of 20% of annual...
-
A bank offers customers the option of receiving interest compounded quarterly, semi-annually, or annually. If the rate of interest is the same, which is the best option for the customer?
-
The director of marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose from the following: a 15-year sponsorship paying \($100,000\)...
-
An athlete signs a five-year endorsement deal with a prominent sponsor. Under this deal the athlete will receive \($5,000\) each year for the first three years and \($6,500\) each year for the final...
Study smarter with the SolutionInn App