I need help with this assignment. See attachment. Thank you.

FINANCE 2 - Assignment #4 Name: Question 1 (10 marks) The Belton Corporation has $5 million in earnings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm has $4 million in excess cash. Part (a) Compute the current price of the stock. Part (b) If the $4 million is used to pay dividends, how much will dividends per share be? Part (c) If the $4 million is used to repurchase shares in the market at a premium price of $54 per share, how many shares will be reacquired? (Round to the nearest share). Part (d) What will the new earnings per share be? Part (e) If the P/E remains constant, what will the new price of the securities be? By how much did the repurchase increase the share price (in dollars)? Part (f) Has the shareholder's total wealth changed as a result of the stock repurchase as opposed to the cash dividend? Explain. Part (g) From the shareholder's perspective, is there any major tax advantage to tendering one's shares versus the receipt of cash dividends? Explain. (2 marks) Part (h) What are some other reasons a corporation may wish to repurchase its own shares in the market? (2 marks) Question 3 (10 marks) Matrix Corporation, Inc. is considering a 15% stock dividend. The capital accounts are as follows: Account Common stock (4,000 shares) Retained earnings Net worth Balance $ 40,000 60,000 $100,000 The company's stock is selling for $40 per share. The company had total earnings of $12,000 with 4,000 shares outstanding and earnings per share were $3.00. The firm has a P/E ratio of 13.33. Part (a) What adjustments would have to be made to the equity accounts for a 15% stock dividend? Show the new capital accounts. (2 marks) Account Balance Part (b) What adjustments would be made to EPS and the share price? (Assume the P/E ratio remains constant.) (2 marks) Part (c) How many shares would an investor have if he or she originally had 100 shares? Part (d) What is the investor's total investment worth before and after the stock dividend if the P/E ratio remains constant? Part (e) Assume Mr. Heart, the president of Matrix Corporation, wishes to keep the cash dividend at a previous level of $1.05 in spite of the fact that the shareholders now have 15% more shares. Because the cash dividend is not reduced, the share price is assumed to remain at $40. What is an investor's total investment worth after the stock dividend if he/she had 100 shares before the stock dividend? Part (f) Under the scenario described in Part (e) above, is the investor better off? Why or why not? (2 marks) Part (g) What is the dividend yield on the shares under the scenario described in Part (e)? (2 marks) Question 5 (10 marks) Martins Apple Farm has decided to acquire an apple dehydrating machine for their new product - apple chips. The cost of the dehydrating machine is $48,000, and it has an economic life of 10 years. At the end of 6 years, the salvage value is expected to be $4,000. This lease vs. borrowing decision will be analyzed over 6 years. Martins may lease the machine from a local leasing organization. It would be an operating lease. Annual lease payments, payable at the beginning of each of the next six years, would be $9,000. Martins could also borrow the money from their bankers, BMO at 11% per year, payable in equal blended payments at the end of each year. The dehydrator has a capital cost allowance of 20%. The benefits of any tax shields are realized at the end of each year. The company's tax rate is 25%. Martins Apple Farm's cost of capital is 16%. Part (a) Calculate the value of the CCA tax shield. Part (b) Calculate the net present value of the purchase option. Part (c) Calculate the net present value of the lease option. Part (d) Should Martin's purchase or lease the dehydrator? Explain