The net income of Niko Corporation is $150,000. The company has 50,000 outstanding shares and 100...

 

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The net income of Niko Corporation is $150,000. The company has 50,000 outstanding shares and 100 percent payout policy. One year from now, the expected value of the firm is $2,000,000. The appropriate discount rate for the company is 12 percent. Tax rate for dividend is zero. Required 1) What is the current value of the firm assuming that current dividend has not yet been paid? (2 marks) 2) What is the ex-dividend price of the company's share if the board follows the current policy? (2 marks) 3) At the dividend meeting, several board members said that the dividend is too low and is depressing the share price. They proposed that the company sell enough new shares to finance a $6.50 dividend. 1) 11) What are amount of funds needed to finance the $6.50 dividend? (2 marks) What is old shareholder value in one year? (2 marks) Under the proposal, what is the current value of the firm? (2 marks) The net income of Niko Corporation is $150,000. The company has 50,000 outstanding shares and 100 percent payout policy. One year from now, the expected value of the firm is $2,000,000. The appropriate discount rate for the company is 12 percent. Tax rate for dividend is zero. Required 1) What is the current value of the firm assuming that current dividend has not yet been paid? (2 marks) 2) What is the ex-dividend price of the company's share if the board follows the current policy? (2 marks) 3) At the dividend meeting, several board members said that the dividend is too low and is depressing the share price. They proposed that the company sell enough new shares to finance a $6.50 dividend. 1) 11) What are amount of funds needed to finance the $6.50 dividend? (2 marks) What is old shareholder value in one year? (2 marks) Under the proposal, what is the current value of the firm? (2 marks)

Answer rating: 100% (QA)

To answer the questions we need to perform calculations based on the given information To calculate the current value of the firm we can use the divid... View the full answer