Q: Go back to the first Rational Demiconductor balance sheet one more time
Go back to the first Rational Demiconductor balance sheet one more time. Assume that Rational does not win the lawsuit (see Problem 5) and is left with only $1 million in surplus cash. Nevertheless Ra...
See AnswerQ: Surf & Turf Hotels is a mature business, although it pays
Surf & Turf Hotels is a mature business, although it pays no cash dividends. Next year’s earnings are forecasted at $56 million. There are 10 million outstanding shares. The company has traditionally...
See AnswerQ: Some types of investors prefer dividend-paying stocks because dividends provide
Some types of investors prefer dividend-paying stocks because dividends provide a regular, convenient source of income. Does demand from these investors necessarily lift the prices of dividend-paying...
See AnswerQ: Fill in the blanks: “A project’s economic income for
Fill in the blanks: “A project’s economic income for a given year equals the project’s _____ less its _____ depreciation. New projects may take several years to reach full profitability. In these case...
See AnswerQ: Half shell Seafood is still generating good profits, but growth is
Half shell Seafood is still generating good profits, but growth is slowing down. How should its CFO decide when to start up a program of paying out cash to stockholders? What questions should the CFO...
See AnswerQ: Investors and financial managers focus more on changes in cash dividends than
Investors and financial managers focus more on changes in cash dividends than on the level of cash dividends. Why?
See AnswerQ: Does the good news conveyed by the announcement of a dividend increase
Does the good news conveyed by the announcement of a dividend increase mean that a firm can increase its stock price in the long run simply by paying cash dividends? Explain.
See AnswerQ: Little Oil has outstanding one million shares with a total market value
Little Oil has outstanding one million shares with a total market value of $20 million. The firm is expected to pay $1 million of dividends next year, and thereafter the amount paid out is expected to...
See AnswerQ: We stated in Section 16-3 that MM’s proof of dividend
We stated in Section 16-3 that MM’s proof of dividend irrelevance assumes that new shares are sold at a fair price. Look back at Problem 17. Assume that new shares are issued in year 1 at $10 a share....
See AnswerQ: Look back one last time at Problem 17. How would you
Look back one last time at Problem 17. How would you value Little Oil if it paid out $500,000 in cash dividends year in and year out, with no expected growth or decline? Remaining free cash flow will...
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