How do you think it will affect the value of the firm

Assignment Help Financial Management
Reference no: EM131247391

The chairman of the board of Alphanull Corporation has announced that the corporation will change its dividend policy from paying a fixed dollar dividend per share. Instead, dividends will be paid out as a residual.

That is, any cash flows left over after the firm has undertaken all profitable investments will be paid out to shareholders. This new policy will obviously increase the variability of dividends paid. How do you think it will affect the value of the firm?

Reference no: EM131247391

Questions Cloud

What will its current price per share be : If it expects to keep the same payout ratio, and to earn 20% on future investments forever, what will its current price per share be? Assume that the cost of capital is 15%.
Evaluate fortune bikes cash position : Evaluate Fortune Bikes cash position. Is the company likely to face any cash flow problem? Which answers to requirement (c) also increase Fortune Bike's cash?
Reconstruction of this signal from its sample : Suppose that we sample this signal with a sampling frequency F3 = 8 kHz. Examine what happens to the frequency F1 = 5 kHz.
Represent the total annual spend : Assuming that the amounts shown represent the total annual spend, calculate the percent of spend for each category. Classify each spend category as either low or high complexity and summarize your reasoning.
How do you think it will affect the value of the firm : That is, any cash flows left over after the firm has undertaken all profitable investments will be paid out to shareholders. This new policy will obviously increase the variability of dividends paid. How do you think it will affect the value of th..
Who are or have been effective in implementing public policy : Select two leaders, at least one of which from your country, who are or have been effective in implementing public policy and think about similarities and differences in terms of their effectiveness in implementing public policy.
Financing the project with new equity : During recent years your company has made considerable use of debt financing, to the extent that it is generally agreed that the percentage of debt in the firms capital structure (either in book or market value terms) is too high.
Break even if each completed unit : A manufacturing process has a fixed cost of $150,000 per month. Each unit of product being produced contains $27 worth of material and takes $45 of labor. How many units are needed to break even if each completed unit has a value of $90?
Identify the types of descriptive statistics : Develop a 1,050-word report in which you: Identify the types of descriptive statistics that might be best for summarizing the data, if you were to collect a sample. Analyze the types of inferential statistics that might be best for analyzing the data..

Reviews

Write a Review

Financial Management Questions & Answers

  Evaluating a project that requires an initial investment

You are evaluating a project that requires an initial investment of $225,000 and has equal annual cash inflows of $85,000 each year for the next five years. What is the payback period?

  Preferred stock valuation-equired rate of return

Nick's Enchiladas Incorporated has preferred stock outstanding that pays a dividend of $3 at the end of each year. The preferred sells for $60 a share. What is the stock's required rate of return (assume the market is in equilibrium with the required..

  What EAR are customers actually paying

A check---cashing store is in the business of making personal loan to walk---up customers. The store makes only one---week loans at 7.5 percent interest per week. What APR must the store report to its customer? What EAR are customers actually paying?

  What will new total market value be after dividend payment

Saguaro Company currently has 30,000 shares outstanding. Each share has a market value of $27. If the firm pays $2 per share in dividends: What will the new total market value be after the dividend payment? The new total market value after the divide..

  What is the payback period-initial cost of construction

Tooth Tortures is considering building a new office after the first was destroyed by a storm. They estimate the initial cost of construction of the new office, and equipment to total $1,000,000. What is the payback period? Dr. Payne states that since..

  Considering a project with an initial fixed asset cost

Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated salv..

  Calculate weighted cost of capital-initial cost outlay

Build an office high rise with 450,000 square feet of office space. The street level will be dedicated to retail. Lease the land to the developer in exchange for the use of 12,000 square feet of office space. Calculate the Weighted Cost of Capita. Ca..

  What happens to the bonds yield maturity of bond matures

A bond market price is $ 950. It has a $ 1000 Par value, will mature in 6 years, and has a coupon interest rate f 8 percent annual interest, but makes its interest payment semiannually. What is the bond's yield to maturity? What happens to the bond's..

  Used to qualify property for the marital deduction

A Q-TIP Trust may be used to qualify property for the marital deduction. All the following statements concerning the requirements that must be met for an effective Q-TIP Trust are correct EXCEPT:

  About the efficiency analysis

(Efficiency analysis) The Brenmar Sales Company had a gross profit margin (gross profits /sales) of 25 percent and sales of $9.5 million last year. 74 percent of the firm’s sales are on credit, and the remainder is cash sales. Brenmar’s current asset..

  The number of years it take to pay off loan

How long will it take to pay off a loan of $51,000 at the annual rate of 8 percent compounded monthly if you make monthly payments of $800. Use five decimals places for the monthly percentage rate in your calculation. The number of years it take to p..

  What price would an investor be expected to pay per share

A stock is expected to pay $3.20 per share every year indefinitely and the equity cost of capital for the company is 10%. What price would an investor be expected to pay per share next year?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd