Question: The Vinson Corporation has earnings of 500 000 with 250 000 shares
The Vinson Corporation has earnings of $500,000 with 250,000 shares outstanding. Its P/E ratio is 20. The firm is holding $300,000 of funds to invest or pay out in dividends. If the funds are retained, the after-tax return on investment will be 15 percent, and this will add to present earnings. The 15 percent is the normal return anticipated for the corporation, and the P/E ratio would remain unchanged. If the funds are paid out in the form of dividends, the P/E ratio will increase by 10 percent because the stockholders in this corporation have a preference for dividends over retained earnings. Which plan will maximize the market value of the stock?
Answer to relevant QuestionsOmni Telecom is trying to decide whether to increase its cash dividend immediately or use the funds to increase its future growth rate. It will use the dividend valuation model originally presented in Chapter 10 for purposes ...The Carlton Corporation has $5 million in earnings after taxes and 2 million shares outstanding. The stock trades at a P/E of 20. The firm has $4 million in excess cash.a. Compute the current price of the stock.b. If the $4 ...What is the significance to working capital management of matching sales and production?Antonio Banderos & Scarves makes headwear that is very popular in the fall/winter season. Units sold are anticipated as:October .......... 1,250November ......... 2,250December ......... 4,500January .......... 3,500 11,500 ...Guardian Inc. is trying to develop an asset-financing plan. The firm has $400,000 in temporary current assets and $300,000 in permanent current assets. Guardian also has $500,000 in fixed assets. Assume a tax rate of 40 ...
Post your question