{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

11. FIN 301 - F09 Dividends

# 11. FIN 301 - F09 Dividends - Dividends Seminar11 Dividends...

This preview shows pages 1–8. Sign up to view the full content.

Dividends Seminar 11

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 Dividends distribution of part of a company's earnings  to its stockholders. usually quoted in terms of the dollar  amount each share receives dividends per share ( DPS or D) = dividends / shares outstanding dividend yield ( DY) = dividends per share/share price
3 Price Behavior around the Ex-Div Date

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
4 Example 1: Going Ex-Dividend VAKKO Inc, which has 100,000 shares  outstanding, declared a cash dividend of \$0.80  per share. The  market values of the firm’s  assets and liabilities are as given below:
5 Example 1: Going Ex-Dividend a. If tomorrow is the ex-dividend date, what is  the share price today? b. What will be the price tomorrow?  (Ignore  taxes) \$9.20 \$0.80 - \$10.00 DPS P P dividend - cum dividend - ex = = - = \$10.00 100,000 \$1,000,000 Shares of Number Equity of Value Market P P today today dividend - cum today = = = =

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
6 Example 1: Stock Repurchase c. Suppose the firm repurchases \$80,000  worth of stock instead of paying dividends –  what will be the price tomorrow? after the repurchase, the firm’s balance sheet  looks like: (Note that both cash and equity have decreased by  \$80,000)
7

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}