Calculate return on common equity, Finance Basics

Assignment Help:

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?


Related Discussions:- Calculate return on common equity

Political and technological factor - investment decisions, Political Factor...

Political Factors and Technological Factors - Investment Decisions i) Political factors - Under conditions of political uncertainty, that decisions cannot be completed as it

Venture Capital, In Term Sheets, what are the outcomes of Economics and Con...

In Term Sheets, what are the outcomes of Economics and Control?

Partnership deeds, Partnership Deeds This is an important document whic...

Partnership Deeds This is an important document which governs the members in partnership firm. It covers among other things the following points:      i. The name, location,

Concentration banking, Concentration Banking Firms along with regional...

Concentration Banking Firms along with regional sales outlets can designate specific of these as regional collection centre. Customers during these areas are necessitated to r

The constant growth model, You have the following information for Stardusts...

You have the following information for Stardusts: Current EPS is $1.79.  The current dividend is $.68 per share.  The return on equity is 24%.  The present price is $49.22. a.

the trade-off theory of capital structure, Please describe the trade-off t...

Please describe the trade-off theory of capital structure and how it vary from the Modigliani and Miller theorem with taxes.

Types of jobbers in stock market, Types of jobbers in Stock Market The...

Types of jobbers in Stock Market There are three kinds of jobbers as: a) Bulls A jobber buys shares while prices are down and hold them in anticipation such t

Present value of an annuity - dcf technique, Present Value of an Annuity - ...

Present Value of an Annuity - DCF Technique An individual investor may not necessarily acquire a lump sum after several years however rather obtain a constant periodic amount

Long term lenders - measuring business performance, Long Term Lenders - Mea...

Long Term Lenders - Measuring Business Performance Long term lenders These involve finances with loans, mortgages and debenture holders.  These have both short and long

Commercial bank for short term loans, Commercial Bank for Short Term Loans ...

Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

Write Your Message!

Captcha
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