recapitalize is it right to repurchase the shares with the debt or to pay dividends with the entire debt. There are major changes that take place in the following list of questions given to us and the following answers are answered according to the questions order. The answers are tabulated below. | Dividends | Repurchase of stock | Outstanding shares | 232‚440‚000 | 183‚686‚000 | Book value of equity | $(1724) | $(1724) | Price per share | $48.63 | $61.53 | Earnings per share | 0.32 | 0.40 |
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The firm’s stocks are undervalued. According to the dividends‚ growth rate‚ and discount rate the share price should be $43.36 which is $8.11 higher than the current market price. If the repurchase of $1Million worth of shares occurs‚ the company’s Return on Equity would increase. This would happen since there is less shareholder’s equity in the company due to the lower amount of shares outstanding. Currently the company’s Return on Equity is better than Standard Auto and Allied Motors but worse
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Dividend Policy at FPL Group FPL Group Overview: The FPL Group was Florida’s largest electric utility group and the fourth largest in America. The FPL Group had annual revenues of exceeding $5 billion. Florida Power & Light Company‚ the main subsidiary of the FPL Group had 3.9 million customer accounts and covered a service area that included six of America’s ten fastest growing metropolitan areas. a. Summarize the key elements of FPL’s financial policy and compare it with other relevant
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(N8400822) Honghu Ye (N8106258) EFB340 Finance Capstone Case Study 1 Group S3 Dat Bui (N8360928) JeongHwan KWON (N8400822) Honghu Ye (N8106258) Table of Contents Abstract1 1.0 Introduction2 2.0 Analysis Share price2 Weighted Average Cost of Capital2 Earnings per Share 3 Voting Control 3 EBIT Interest Coverage Ratio 4 Flexibility 4 3.0 Recommendation5 4.0 Reference List7 5.0 Appendix Appendix 18 Appendix 29 Appendix 310 Appendix 412 Appendix 513 Appendix 614 Appendix 715
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It seemed that the board of directors at MCI was divided between two possible solutions. Should the company finance the repurchase by increasing MCI’s debt financing by at least doubling the current debt-equity ration that stood at 36% at that time (MCI)? Conversely‚ would a more conservative approach of using an open-market purchase program‚ announcing its intentions to repurchase its stock from "time to time" but only as corporate funds become available‚ be more appropriate (MCI)? The answer to this
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commitment compared with share buyback‚ because‚ according to Lintner managers prefer to increase dividend rather than decreasing them. On the other hand‚ share buyback does not commit the company to future pay-out. In other words‚ repurchasing reserves financial flexibility relative to dividend. In fact‚ the study of …‚ company with higher operating cashflow are likely to increase dividend‚ while company with higher non operating cash flow are more likely to increase repurchase. In our case‚ the G corporation
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Group-based case report Torstar Corporation BUSN81 Theory of Corporate Finance 2011 Autumn 1. Introduction The case of Torstar Corporation suggests the plan and result of repurchasing its Class B shares in December of 1997. Besides this‚ the situation of its business structure‚ capital structure and expenditures‚ future plan are also described in the case. Therefore‚ the purpose of our case study is to state‚ analyze and drew to some important conclusions about Torstar Corporation
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earnings per share (by a share repurchase). Leverage can increase a firm’s expected earnings per share. An argument is that by doing so‚ leverage should also increase the firm’s stock price. Because BBBY has no debt‚ they pay no interest‚ and because in perfect capital markets there are no taxes‚ BBBY’s earnings would equal its EBIT. If BBBY has new debt‚ they will have interest payments each year‚ so their earnings will decrease (EBIT – interest). If BBBY uses the debt to repurchase shares‚ the number
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focusing on a share repurchase financed by cash and new debt issuance. After the analysis of a simple proposal‚ it is obvious that the financial ratios and cost of capital are strengthened after the bond issuing and share buyback. We then evaluate the amount of debt issuing that is most favorable to the company by analyzing the trade-off involve and under the consideration of the information asymmetry and agency cost. Also‚ a special dividend plan is introduced and compared with the repurchase. Detailed
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Dividend Policy 1 4 Key Concepts and Skills Cash Dividend Types Understand dividend types and how they are paid Understand the issues surrounding dividend policy decisions Understand the difference between cash and share dividends Understand why share repurchases are an alternative to dividends Regular cash dividend – cash payments made directly to shareholders‚ usually each quarter Extra cash dividend – indication that the “extra” “ t ” amount may not be repeated in the t tb t d i
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