Problem 17-7 on Ex-dividend Price Based on Chapter 17 Payout Policy Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding with a current market price of $15 per share. Natsam’s board has decided to pay out this cash as a one-time dividend. a. What is the ex-dividend price of a share in a perfect capital market? The payoff for the dividends would be $250/500 = $.50 per share. Therefore‚ the price for the shares would go down by that amount and
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models attempt to find the intrinsic or "true" value of an investment based only on fundamentals. Looking at fundamentals simply mean you would only focus on such things as dividends‚ cash flow and growth rate for a single company‚ and not worry about any other companies. Valuation models that fall into this category include the dividend discount model‚ discounted cash flow model‚ residual income models and asset-based models. In contrast to absolute valuation models‚ relative valuation models operate
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ratio.It may mislead some of investors to buy the stock . Apart from PE ratio‚ Dividend Discount Model (DDM) will be a better way to value the stock price. The DDM model seeks to value a stock by using predicted dividends and discounting them back to their present value. The Formula of DDM is Dividend per share over discount rate minus dividend growth rate. Value of Stock = D1 R- G Where‚ • DPS (1) = Dividends per
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use eleven ratios to analyze the financial position of the company. The ratios that he has used are Return on Investment (ROI)‚ Return to shareholders‚ Return on Capital Employed (ROCE)‚ Earnings per share (EPS)‚ Price-Earnings Ratio (P/E)‚ Dividend yield‚ Dividend payout‚ Gearing ratio‚ Interest cover‚ Current ratio and Acid test ratio. The author was not able to use the gross profit ratio‚ net profit ratio and working capital turnover because since only JKH PLC is considered and not its subsidiaries
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considered a permanent investment. Stockholders are people who invest in stocks and their ownership in the corporation is evidenced by a stock certificate. Stocks may be obtained thru: * Subscription * Purchase * Issuance of stock dividends Almost all of the initial capital of the corporation including a large segment of the future capital comes from the sale of stock. Stock Financing * Refers to the procurement of corporate funds through the sale of shares of stocks to prospective
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* 7.4/100 = $74 PV factor = (1/i)*(1- 1/(1+i)^n) = 6.4176 So‚ PV = $74*6.4176 = 474.90| So the fair value of bond = 474.90+422.41 = $897.31 A10. (Dividend discount model) Assume RHM is expected to pay a total cash dividend of $5.60 next year and its dividends are expected to grow at a rate of 6% per year forever. Assuming annual dividend payments‚ what is the current market value of a share of RHM stock if the required return on RHM common stock is 10%? Current market value = D1/(Required
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Bankruptcy Risk Assessment 11 4.5 Leverage Policy Summary 12 4.6 Is this the Optimal Leverage Policy? 13 5 Dividend Policy 14 5.1 Current and Recent History of Dividend Payment 14 5.2 Dividend policy comparing to comparable firms 14 5.3 Relevant Company Characteristics to its Dividend Policy 16 5.4 Analysis of Company’s Dividend Policy and Lintner’s Analysis 16 5.5 Optimal Dividend Policy 17 6 Valuation 19 6.1 Assumptions 19 6.2 Valuation Method 20 6.2.1 Determining the Cost
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Bankruptcy Risk Assessment 11 4.5 Leverage Policy Summary 12 4.6 Is this the Optimal Leverage Policy? 13 5 Dividend Policy 14 5.1 Current and Recent History of Dividend Payment 14 5.2 Dividend policy comparing to comparable firms 14 5.3 Relevant Company Characteristics to its Dividend Policy 16 5.4 Analysis of Company’s Dividend Policy and Lintner’s Analysis 16 5.5 Optimal Dividend Policy 17 6 Valuation 19 6.1 Assumptions 19 6.2 Valuation Method 20 6.2.1 Determining the Cost
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1. Select an organization of your choice and discuss the cash Management system in that organization. Give your Views or suggestions on the prevailing system of cash management in that organization and any suitable changes to be brought about‚ to improve the present system? Cash management is a set of strategies or techniques a company uses to collect‚ track and invest money. Although cash by definition refers only to paper or coin money‚ in cash management‚ companies usually also work with cash
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classify the finance functions or financial decisions into four major groups: (A) Investment Decision or Long-term Asset mix decision (B) Finance Decision or Capital mix decision (C) Liquidity Decision or Short-term (current) asset mix decision (D) Dividend Decision or Profit allocation decision (A) Investment Decision Investment decisions relate to selection of assets in which funds are to be invested by the firm. Investment alternatives are numerous. Resources are scarce and limited. They have to
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