Business, 12.02.2020 05:58 eaglesjohnson414

(Dividend irrelevance of the timing of cash dividends) The Caraway Seed Company sells specialty gardening seeds and products primarily to mail-order and Internet customers. The firm has $ 200 comma 000 available for distribution as a cash dividend immediately and plans to shut down its business at the end of one year, at which time it will be prepared to pay a liquidating dividend of $1.20 million to the firm's stockholders. The firm's shareholders require a 10.0 percent rate of return for investing in the all-equity-financed firm.
A. What do you estimate the value of Caraway's equity to be today if it pays out a $200 comma 000 cash dividend today and plans to pay a $1.20 million liquidating dividend at the end of the year?
B. If Caraway's board of directors decides to pay a $600 comma 000 dividend today to its existing shareholders using an equity offering selling new shares of common stock to raise the additional $400 comma 000 it needs to make the cash dividend, what will be the value of the existing shares of stock? The new shares?

Answers: 3

Show answers

Other questions on the subject: Business

Business, 22.06.2019 07:00, Maria3737

For the past six years, the price of slippery rock stock has been increasing at a rate of 8.21 percent a year. currently, the stock is priced at $43.40 a share and has a required return of 11.65 percent. what is the dividend yield? 3.20 percent 2.75 percent 3.69 percent

Answers: 3

continue

Business, 22.06.2019 11:10, takaralocklear

An insurance company estimates the probability of an earthquake in the next year to be 0.0015. the average damage done to a house by an earthquake it estimates to be $90,000. if the company offers earthquake insurance for $150, what is company`s expected value of the policy? hint: think, is it profitable for the insurance company or not? will they gain (positive expected value) or lose (negative expected value)? if the expected value is negative, remember to show "-" sign. no "+" sign needed for the positive expected value

Answers: 2

continue

Business, 23.06.2019 23:00, melkumathurin

An is a tax issues by the federal government on important goods

Answers: 2

continue

Business, 24.06.2019 01:00, u8p4

Sean was recently hired to join the marketing team at axon international. he will be starting at the company in two weeks. sean has the reputation of being an expert in ad campaigns and catching the attention of the target audience. however, he also has the reputation of not getting along with anyone. he doesn't care much about where and for whom he works but is primarily motivated to achieve goals for himself and beat his own records. as soon as amanda heard about sean joining the team, she turned in her resignation. ashton, another team member, called sean and met him for lunch to express all the team members' concerns and to smooth things out before sean formally joins the team. ashton's reaction can be described as

Answers: 3

continue

You know the right answer?

(Dividend irrelevance of the timing of cash dividends) The Caraway Seed Company sells specialty gard...