Calculate return on common equity, Finance Basics

At the end of the fiscal year ending June 30, 2003, Microsoft reported common equity of $64.9 billion on its balance sheet, with $49.0 billion invested in financial assets (in the form of cash equivalents and short term investments) and no financing debt. For fiscal year 2004, the firm reported $7.4 billion in comprehensive income, of which $1.1 billion was after-tax earnings on the financial assets.

This month Microsoft is distributing $34 billion of financial assets to shareholders in the form of a special dividend.

1. Calculate Microsoft's return on common equity (ROCE) for 2004.

2. Holding all else constant what would Microsoft's ROCE be after the payout of $34 billion?

3. Would you expect the payout to increase or decrease earnings growth in the future? Why?

4. What effect would you expect the payout to have on the value of a Microsoft share?

Posted Date: 2/26/2013 2:05:17 AM | Location : United States

Related Discussions:- Calculate return on common equity, Assignment Help, Ask Question on Calculate return on common equity, Get Answer, Expert's Help, Calculate return on common equity Discussions

Write discussion on Calculate return on common equity
Your posts are moderated
Related Questions
AsStudents will analyze and synthesize the financial reports of an organization of their choice and present their findings in a PowerPoint presentation (with completed Notes sectio

Explain about commercial banks in depository institutions. Commercial banks: Commercial banks accept deposits or liabilities to create loans or assets and to buy governme

Future Ltd is a leading music entertainment company in the country and the stocks of the company are actively traded in the stock exchange. For the year just ended few days back,

Benefits Ordinary Share Capital - Financing Benefits of using ordinary share capital in the financing They facilitate projects particularly long-term projects since they

Floatation of New Shares Rules for floatation of new shares The company must contain an issued share capital of at least Kshs.20 M. The company must contain c

Question: Suppose that a security is presently selling for a price of $65, the nominal interest rate is 8%, and the security volatility is 0.15. a) Determine Delta of a Euro

i have the information given but i am having trouble getting the income statement done correctly

Every time a listed company does a share buyback, investors and media alike would debate fiercely on the merits of such a scheme. There are investors who prefer buybacks to high

Valuation of Securities The previous methods were perfect for valuing the entire business however it is also essential to ascertain the value of part of a business namely shar