Community Electric Power Corporation (CEPC) is the one and only power supplier to Uranium City, located in

Question:

Community Electric Power (CEPC) is the one and only power supplier to Uranium City, located in the far north. The power rates are regulated by the government and consequently, CEPC has had a net income of $75 million for each of the last five years. Beginning January 1, 2011, CEPC will be the monopoly supplier of power to Zinc City, located in the southeast part of the far north. CEPC will earn an additional $45 million on this new deal. CEPC has 5 million common shares outstanding and maintains a payout ratio of 40%.
Required:
(a) Calculate the annual per share prior to the expansion to Zinc City.
(b) What would the information signalling theory of dividends indicate that CEPC should do in 2011? Quantify your answer.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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...