FIN 620 Long-term Financial Management Homework Assignment 9 Answers – Homeworkmade

DOWNLOAD: FIN 620 Long-term Financial Management Homework Assignment 9 Answers – Homeworkmade

FIN 620 Homework Assignment 9

Problem 19­-10 Dividends and Stock Price

The Mann Company belongs to a risk class for which the appropriate discount rate is 10 percent. Mann currently has 220,000 outstanding shares selling at $110 each. The firm is contemplating the declaration of a $4 dividend at the end of the fiscal year that just began. Assume there are no taxes on dividends. Answer the following questions based on the Miller and Modigliani model, which is discussed in the text. 

Problem 29-­10 Cash versus Stock as Payment

Consider the following premerger information about a bidding firm (Firm B ) and a target firm (Firm T ). Assume that both firms have no debt outstanding. 

Problem 29-­14 Merger NPV

Fly­By­Night Couriers is analyzing the possible acquisition of Flash­in­the­Pan Restaurants. Neither firm has debt. The forecasts of Fly­By­Night show that the purchase would increase its annual aftertax cash flow by $390,000 indefinitely. The current market value of Flash­in­the­Pan is $7 million. The current market value of Fly­By­Night is $22 million. The appropriate discount rate for the incremental cash flows is 8 percent. Fly­By­Night is trying to decide whether it would offer 30 percent of its stock or $9 million in cash to Flash­in­the­Pan. 

Problem 19-­4 Stock Splits and Stock Dividends

Roll Corporation (RC) currently has 330,000 shares of stock outstanding that sell for $64 per share. Assuming no market imperfections or tax effects exist, what will the share price be after: 

Problem 19­-14 Dividends and Firm Value

The net income of Novis Corporation is $85,000. The company has 25,000 outstanding shares and a 100 percent payout policy. The expected value of the firm one year from now is $1,725,000. The appropriate discount rate for Novis is 12 percent, and the dividend tax rate is zero.