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39 rohter galeano inc is considering how to set its

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39.Rohter Galeano Inc. is considering how to set its dividend policy. It has a capital budget of$3,000,000. The company wants to maintain a target capital structure that is 15% debt and 85% equity.The company forecasts that its net income this year will be $3,500,000. If the company follows aresidual dividend policy, what will be its total dividend payment?a.$205,000b. $500,000c.$950,000d. $2,550,000e.$3,050,000ANS: CThe amount of new investment which must be financed with equity is:$3,000,00085% = $2,550,000.Since the firm has $3,500,000 of net income,$950,000= $3,500,000$2,550,000 will be left fordividends.PTS: 1DIF:Difficulty: EasyOBJ: LO: 14-7NAT: BUSPROG: AnalyticSTA: DISC: Dividend policy
LOC: TBATOP: Residual dividend policynonalgorithmicKEY:Bloom’s: ApplicationMSC: TYPE: Multiple Choice: ProblemNOT: With some combinations of variables, the residual policy may result in zero dividends and azero payout ratio. These outcomes are noted in the topic [TOP] field if applicable.40.Sanchez Company has planned capital expenditures that total $2,000,000. The company wants tomaintain a target capital structure that is 35% debt and 65% equity. The company forecasts that its netincome this year will be $1,800,000. If the company follows a residual dividend policy, what will beits total dividend payment?a.$100,000b. $200,000c.$300,000d. $400,000e.$500,000ANS: EThe amount of new investment which must be financed with equity is:$2,000,00065% = $1,300,000.Since the firm has $1,800,000 of net income only$500,000= $1,800,000$1,300,000 will be left fordividends.PTS: 1DIF:Difficulty: EasyOBJ: LO: 14-7NAT: BUSPROG: AnalyticSTA: DISC: Dividend policyLOC: TBATOP: Residual dividend policynonalgorithmicKEY:Bloom’s: ApplicationMSC: TYPE: Multiple Choice: ProblemNOT: With some combinations of variables, the residual policy may result in zero dividends and azero payout ratio. These outcomes are noted in the topic [TOP] field if applicable.41.Yesterday, Berryman Investments was selling for $90 per share. Today, the company completed a 7-for-2 stock split. If the total market value was unchanged by the split, what is the price of the stocktoday?a.$23.21b. $24.43c.$25.71d. $27.00e.$28.35ANS: CNumber of new sharesNumber of old sharesOld (pre-split) priceNew price = Old price(Old shrs/New shrs)$25PTS: 1DIF:Difficulty: EasyOBJ: LO: 14-13NAT: BUSPROG: AnalyticSTA: DISC: Dividend policyLOC: TBATOP: Stock splitsfractional splitsKEY:Bloom’s: ApplicationMSC: TYPE: Multiple Choice: ProblemNOT: With some combinations of variables, the residual policy may result in zero dividends and azero payout ratio. These outcomes are noted in the topic [TOP] field if applicable.
42.Last week, Weschler Paint Corp. completed a 3-for-1 stock split. Immediately prior to the split, itsstock sold for $150 per share. The firm's total market value was unchanged by the split. Other thingsheld constant, what is the best estimate of the stock's post-split price?a.$50.00b. $52.50c.$55.13d. $57.88e.$60.78ANS: ANumber of new sharesNumber of old sharesPre-split stock price$Post-split stock price: P0/New per old =$50PTS: 1DIF:Difficulty: EasyOBJ: LO: 14-13NAT: BUSPROG: AnalyticSTA: DISC: Dividend policyLOC: TBATOP: Stock splitssimple splitsKEY:Bloom’s: ApplicationMSC: TYPE: Multiple Choice: ProblemNOT: With some combinations of variables, the residual policy may result in zero dividends and azero payout ratio. These outcomes are noted in the topic [TOP] field if applicable.

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Term
Spring
Professor
bender
Tags
The Land, Strike price, Option time value

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