KMS Corporation has assets with a market value of $500 million, $50 million of which are cash.

Question:

It has debt of $200 million, and 10 million shares outstanding. Assume perfect capital markets.

a. What is its current stock price?

b. If KMS distributes $50 million as a dividend, what will its share price be after the dividend is paid?

c. If instead, KMS distributes $50 million as a share repurchase, what will its share price be once the shares are repurchased?

d. What will its new market debt-equity ratio be after either transaction?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Corporate Finance

ISBN: 9781292446318

6th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

See More Books

Question Posted: Apr 04, 2024 04:00 AM

See More Questions

KMS Corporation has assets with a market value of $422 million, $36 million of which are cash. It has debt of $186 million and 18 million shares outstanding. Assume perfect capital markets. a. What...
KMS Corporation has assets with a market value of $ 426 million, $ 25 million of which are cash It has debt of $ 224 million, and $15 million shares outstanding Assume perfect capital markets a What...
26. With its current leverage, Impi Corporation will have net income next year of 4.5 million. If Impis corporate tax rate is 35% and pay 8% interest on its debt, how much additional debt can Impi...
You invested $1000 in Sinoland Bank stock when Sinoland/US Dollar exchange rate was 10:1, and you received exactly 200 local shares of the stock. The stock price rises 23% in local currency terms,...
1. Write an SQL query to answer the following question: Which instructors are qualified to teach ISM 3113? 2. Write an SQL query to answer the following question: Is any instructor qualified to teach...
IPOs-initial public offerings of stock-create billions of dollars of new wealth for owners, managers, and employees of companies that were previously privately owned. Nevertheless, hundreds of large...
Some of the traditional sustainability reports are an integrated report, a triple bottom line report, and a CSR report. Research the background of these reports and explain the difference between...
Rainey Enterprises loaned $20,000 to Small Co. on June 1, 2016, for one year at 6 percent interest. Required a. Record these general journal entries for Rainey Enterprises: (1) The loan to Small Co....
a) Investment in real estate is one of the booming business in Kenya today and most of companies and wealthy individuals have been venturing into the business. Understanding on the rights of real...
Natsam Corporation has $$250$ million of excess cash. The firm has no debt and 350 million shares outstanding, with a current market price of $$20$ per share. Natsams board has decided to pay out...
EJH Company has a market capitalization of $$1.6$ billion and 25 million shares outstanding. It plans to distribute $$120$ million through an open market repurchase. Assuming perfect capital...
In what circumstances could a calendar-year C corporation make an election on February 1, year 1, to be taxed as an S corporation in year 1 but not have the election effective until year 2?
Show the contents of the assemblers symbol table at the end of code generation for each line of the following programs: a. b. ORG 200 pl: ADR r4,a LDR r0.[r4] ADR r4.e LDR r1.[4] ADD ro.ro.rl CMP...
Determine whether each of these programs is reentrant. a. int pl(int a, int b) { b. int x, y: return( a + b); } int p2(int a) { C. int x, y: return a + x; } int p3(int a, int b) { if (a > 0) x-b;...
Can you apply code motion to the following example? Explain. for (i = 0; i < N; i++) for (j = 0; j < M; j++) z[i][j] = a[i] * b[i][j];
Your linker uses a single pass through the set of given object files to find and resolve external references. Each object file is processed in the order given, all external references are found, and...
Because weve all done some kind of work and know other people who also work, its not surprising that we assume various things about how people behave on the job. After all, its something we...
Calculate the magnetic flux through the area enclosed by a 300-turn, 7.20-mH coil when the current in the coil is 10.0 mA.
Reichenbach Co., organized in 2018, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2018 and 2019. Instructions...
Identify and describe a ritual you have experienced for each of the following: patterned family interaction, family tradition, and family celebration . How did each of those come to be a ritual in...
c. A 30 year old client asks; "I'm hearing a lot about Bitcoin millionaires. So, why aren't we investing in Bitcoin?" (Describe 3 reasons why or why not you would invest clients assets in Bitcoin and...
You have discovered a new method for staining ascospores. Four unaffiliated laboratories conduct rigorous testing of your methodology, and the personnel from each facility agree that your method is...

KMS Corporation has assets with a market value of $500 million, $50 million of which are cash.

Question:

Step by Step Answer:

Lets solve each part of the question step by step a Current stock price before any distribution The stock price can be calculated using the market value of the equity total assets minus total debt div...View the full answer

Corporate Finance

Students also viewed these Business questions