Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
32. Suppose a firm has a retention ratio of 40 percent and net income of $10 million. How
much does it pay out in dividends?
33. Suppose a firm has a retention ratio of 35 percent, net income of $35 million, and 10
million shares outstanding. What would be the dividend per share paid out on the firm's stock?
34. Suppose a firm has a retention ratio of 25 percent, net income of $30 million, and 5
million shares outstanding. What would be the dividend per share paid out on the firm's stock?
35. Suppose a firm has a retention ratio of 10 percent, net income of $40 million, and 4
million shares outstanding. What would be the dividend per share paid out on the firm's stock?
36. Suppose a firm has a retention ratio of 15 percent, net income of $60 million, and 15
million shares outstanding. What would be the dividend per share paid out on the firm's stock?
37. Suppose a firm has a retention ratio of 80 percent, net income of $10 million, and 2
million shares outstanding. What would be the dividend per share paid out on the firm's stock?
38. Suppose a firm has a retention ratio of 25 percent, net income of $21 million, and 3
million shares outstanding. What would be the dividend per share paid out on the firm's stock?
39. If a firm has retained earnings of $10 million, a common shares account of $15 million,
and additional paid-in-capital of $5 million, how much would be transferred in (or out) of these
accounts in response to a 50 percent stock dividend, respectively?
40. If a firm has retained earnings of $40 million, a common shares account of $50 million,
and additional paid-in-capital of $25 million, how much would be transferred in (or out) of these
accounts in response to a 40 percent stock dividend, respectively?
41. If a firm has retained earnings of $4 million, a common shares account of $7 million, and
additional paid-in-capital of $3 million, how much would be transferred in (or out) of these
accounts in response to a 20 percent stock dividend, respectively?
42. If a firm has retained earnings of $20 million, a common shares account of $25 million,
and additional paid-in-capital of $15 million, how much would be transferred in (or out) of these
accounts in response to a 15 percent stock dividend, respectively?
43. If a firm has retained earnings of $20 million, a common shares account of $40 million,
and additional paid-in-capital of $10 million, how much would be transferred in (or out) of these
accounts in response to a 30 percent stock dividend, respectively?
44. Balloons, Inc. normally pays a quarterly dividend. The last such dividend paid was $0.80,
all future quarterly dividends are expected to grow at 8 percent, and the firm faces a required
rate of return on equity of 13 percent. If the firm just announced that the next dividend will be an
extraordinary dividend of $2.00 per share that is not expected to affect any other future
dividends, what should the stock price be?
45. Cups N Saucers, Inc. normally pays a quarterly dividend. The last such dividend paid was
$1.00, all future quarterly dividends are expected to grow at 7 percent, and the firm faces a
required rate of return on equity of 15 percent. If the firm just announced that the next dividend
will be an extraordinary dividend of $3.00 per share that is not expected to affect any other future
dividends, what should the stock price be?
46. Candy Town, Inc. normally pays a quarterly dividend. The last such dividend paid was
$2.00, all future quarterly dividends are expected to grow at 10 percent, and the firm faces a
required rate of return on equity of 15 percent. If the firm just announced that the next dividend
will be an extraordinary dividend of $5.00 per share that is not expected to affect any other future
dividends, what should the stock price be?
47. Choc Hut, Inc. normally pays a quarterly dividend. The last such dividend paid was $1.50,
all future quarterly dividends are expected to grow at 6 percent, and the firm faces a required
rate of return on equity of 18 percent. If the firm just announced that the next dividend will be an
extraordinary dividend of $5.00 per share that is not expected to affect any other future
dividends, what should the stock price be?
48. Sky, Inc. normally pays a quarterly dividend. The last such dividend paid was $2.50, all
future quarterly dividends are expected to grow at 4 percent, and the firm faces a required rate of
return on equity of 16.5 percent. If the firm just announced that the next dividend will be an
extraordinary dividend of $10.00 per share that is not expected to affect any other future
dividends, what should the stock price be?
49. Wheels and More, Inc. normally pays an annual dividend. The last such dividend paid was
$3.00, all future dividends are expect to grow at a rate of 8 percent per year, and the firm faces a
require rate of return on equity of 12 percent. If the firm just announced that the next dividend
will be an extraordinary dividend of $7 per share that is not expected to affect any other future
dividends, what should the stock price be?
50. JEN Corp. is expected to pay a dividend of $2.00 per year indefinitely. If the appropriate
rate of return on this stock is 12 percent per year, and the stock consistently goes ex-dividend 25
days before dividend payment date, what will be the expected minimum price in light of the
dividend payment logistics?
51. JEN Corp. is expected to pay a dividend of $2.00 per year indefinitely. If the appropriate
rate of return on this stock is 12 percent per year, and the stock consistently goes ex-dividend 25
days before dividend payment date, what will be the expected maximum price in light of the
dividend payment logistics?
