Question: Need help with C & D Below : Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the

Need help with C & D Below:

Consolidated Pasta is currently expected to pay annual dividends of $10 a share in perpetuity on the 2.7 million shares that are outstanding. Shareholders require a 10% rate of return from Consolidated stock.

a. What is the price of Consolidated stock? Stock price $ 100

b. What is the total market value of its equity? (Enter your answer in millions.) Market value of equity $ 270 million

Consolidated now decides to increase next years dividend to $20 a share, without changing its investment or borrowing plans. Thereafter the company will revert to its policy of distributing $10 million a year.

c. How much new equity capital will the company need to raise to finance the extra dividend payment? (Enter your answer in millions.) New equity ?

d. What will be the total present value of dividends paid each year on the new shares that the company will need to issue? (Enter your answer in millions.) Present value ?

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