What is the value of a share of stock

Assignment Help Finance Basics

Reference no: EM131426905

The XYZ Corporation has an expected dividend of $4 one period from now. This dividend is expected to grow by 2 percent per period.

a. What is the value of a share of stock, assuming that the appropriate discount rate for expected future dividends-e.g., the expected rate of appreciation in the share price of XYZ between dividends-is 10 percent per period? For your answer, assume that the effective personal tax rate on dividends is 40 percent and the effective personal tax rate on capital gains and share repurchases is zero.

b. The XYZ Corporation announces that it will stop paying dividends. Instead, the company will engage in a stock repurchase plan under which future cash that would previously have been earmarked for dividend payments will now be used exclusively for stock repurchases. Assuming no information effects, what should the new price of a share of XYZ stock be when market participants first learn of this announcement?

Reference no: EM131426905

Questions Cloud

What is the effective tax rate on alpha’s profits : From Daniel's perspective, what is the effective tax rate on Alpha's profits if its entire after-tax profits are distributed as a dividend?

How will you foster resiliency as part of a community plan : At the age of nine, Anita moved from a small town to a big city because her father was transferred to a new job. Anita entered fifth grade in the middle of the term and was immediately ostracized by her female classmates. Anita begged her parents ..

Would you send entire report to all of interested parties : Would you send the entire report to all of the interested parties, such as stakeholders, management, and the project team? Why or why not?

The market demand function reads : The market demand function reads Q( P) = 50 - 2P. The government's total cost for producing water are described as follows: TC(Q) = 100 + 10Q.

What is the value of a share of stock : Assuming no information effects, what should the new price of a share of XYZ stock be when market participants first learn of this announcement?

Why is there a discrepancy between the two conclusions : If the researcher had examined 200 flies and counted exactly twice as many in each category - 118, 40, 22, 20 - what conclusion would he have reached?

Develop map of a healthcare process : Individually or in teams, develop a map of a healthcare process or system with which you are familiar. Make sure that your process map has a start and an endpoint, all inputs and outputs are defined, and all key process steps are included. Explain yo..

How much money would the consumer : A consumer has quasilinear preferences over a single good and money, with demand function x(p) = max{15 - p/2, 0} for the good. 1) How much money would the consumer be willing to pay to gain access to a market for the good with uniform price $10 per..

Explain the bhutanese views on happiness : Write a paper that Include the following:Explain the Bhutanese views on happiness.Contrast the "good life" as reflected in Bhutanese and American culture.

User Account

All Pages