Newcastle auto plc has a current cash flow of 4.4 million and pays no dividends. The Present value of the company´s future cash flows is 74 million. The company is entirely financed with equity and has 800.000 shares outstanding. Assume the dividend tax is zero.

Question 1. What is the share price of Newcastle Auto´s equity?
Question 2. Suppose the board of directors of Newcastle Autos announces its plan to payout 60% of its current cash flow as cash dividends to its shareholders. How could you achieve a zero payout policy on your own, if you own 1.000 shares of Newcastle Autos equity?

Answer rating: 100% (QA)

Solution Turrent Penod CF 44 million Pr of all fuhere CFs 74 mil... View the full answer