Benedicta has proposed that her shares pay non-cumulative cash dividends of 10% of the original cost per
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Benedicta has proposed that her shares pay non-cumulative cash dividends of 10% of the original cost per share ($8.1683). At conversion, accrued dividends convert into common stock at original cost per share. Deal is priced on one round of financing and as if non-dividend bearing stock with a 50% required return were used.
Value is $100M and Benedicta owns 38% in 5 years based off a $5M investment today (50% rate of return).
What effect does using the security proposal of Benedicta have on her rate of return? How much of the company does she own?
Related Book For
Intermediate Accounting
ISBN: 978-0470423684
13th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
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