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Assume that a firm has a steady record of paying stable dividends for years. Market analysts had expected management to increase the dividend by 7.5% in the latest quarter. However, management announced a 15% increase in the current year's dividend. The market value of the stock rose 20% on the day of the announcement. Which of the following would best explain the stock market's reaction to the announcement? Please choose from the 4 options below.
Agency theory
Dividend irrelevance theory
Residual Dividend Theory
Expectations Theory
Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $150,000 if credit is extended to these new customers. Of the new accounts receivable generated, 5% will prove to be..
Assuming a tax rate of 35%, depreciation expenses of $400,000 will
Choose a health care facility that you are currently working with or one that you would like to work for in the future. This facility will be used throughout the course as you plan your capital investment budget.
Staal Corporation will pay a $2.82 per share dividend next year. The company pledges to increase its dividend by 3 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock ..
Why would the total payout model need?
The owner of a house worth $180,000 purchases an insurance policy at the beginning of the year for a price of $1,000. The deductible on the policy is $5,000. If after 6 months the homeowner experiences a casualty loss valued at $45,000, what is the h..
Crosby Industries has a debt-equity ratio of 1.6. Its WACC is 10 percent, and its cost of debt is 7 percent. There is no corporate tax. What is Crosby’s cost of equity capital? What would the cost of equity be if the debt-equity ratio were 0.4? What ..
Secolo Corporation stock currently sells for $30 per share. The market requires a return of 11.4 percent on the firm’s stock. If the company maintains a constant 3.7 percent growth rate in dividends, what was the most recent dividend per share paid o..
A premium bond that pays $60 in interest annually matures in seven years. The bond was originally issued three years ago at par. Which one of the following statements is accurate in respect to this bond today?
Fanshawe collge was gien a donation that will provide semi-annual scholarships payments of $4000, to be awarded starting 3 years from now. If the money is invested at 6% compounded quaterly, what is the size of the required donation?
Currently Omega Corporation’s shares are selling at $60 per share and company is paying $5 per share dividend. Dividends are expected to grow at an annual rate of 3% for foreseeable future. Required rate of return for investors is 12%. Calculate the ..
Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what must be the market's expectation of the growth rate of MB..
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