Compare the share price with the deferred dividend

Assignment Help Financial Management

Reference no: EM131185131

Suppose the board of a company decides to invest $250 million of cash in 1 year government bills yielding 4% and use the proceeds from the sale of the bills to pay a higher dividend next year.

A. What would be the company's share price in this case?

B. Compare the share price with the deferred dividend to the share price when the $250 million is immediately paid out in dividends. What can you conclude?

Reference no: EM131185131

Questions Cloud

List a way low income might interfere with your life : One out of five older older adults have income from earnings . In 2014 ,the median annual income of the four-fifths of people age 65 and older and older who are fully retired was $18,096.Use this figure to develop a monthly budget ($1500 a month) wha..

Assuming constant rate of inflation : Suppose there exists a bank that offers an APR of 5.4% indefinitely on current deposits. If you wanted to setup an account that would pay monthly instalments of $3000 indefinitely, how much should your initial deposit be?

Contracts with businesses will be governed by common law : You are the manager of Acme Fireworks, a fireworks retailer who sells fireworks, puts on ground display fireworks, and large aerial display fireworks. The company started in the owner’s garage two years ago and now has 15 employees that you manage. D..

Advantages-disadvantages of internal rate of return rule : What is the amount of the depreciation expense for the four year for this company if it just purchased some fixed assets classified as 5-year property for MACRS? The assets cost $15,000. List and briefly discuss the advantages and disadvantages of th..

Compare the share price with the deferred dividend : Suppose the board of a company decides to invest $250 million of cash in 1 year government bills yielding 4% and use the proceeds from the sale of the bills to pay a higher dividend next year. What would be the company's share price in this case? Com..

Managing the cost of fuel in such volatile environment : For the past year, oil prices have been extremely volatile, particularly within the past few months from a low of $26 per barrel to now in the mid 40's. As a CEO of Southwest, what would your strategy for managing the cost of fuel in such volatile en..

The market interest rates suddenly increase : A bond of MacKinnons Inc. has face value of $1000, pays 6% coupon semiannually, and has 20 years to maturity. The bond has a quoted price of 102. By how many percentage points would the price of MacKinnons’ bond change if the market interest rates su..

Use of the federal budget to help private business : The federal government recently provided tax payers’ money to major corporations that filed for bankruptcy protection from their creditors. Some have paid the funds back, and others have not. Does the U. S. Constitution or any of its 27 Amendments al..

Ordinary annuity-interest is compounded with each payment : In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. You and your new spouse each bring home $1600 each month after taxes and other payroll deductions. By livin..

User Account

All Pages