Corporate Financial Strategies: Dividend Policies, Stock Splits, And Repurchases

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Corporate Financial Strategies: Dividend Policies, Stock Splits, and Repurchases 1. Residual dividend model Axel Telecommunications has a target capital structure that consists of 70% debt and 30% equity. The company anticipates that its capital budget for the upcoming year will be $2,000,000. If Axel reports net income of $700,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio? Round your answer to two decimal places. ___14.29_____ % ________________________________________ 2. Problem 15 - 2 Stock split Gamma Medical's stock trades at $145 a share. The company is contemplating a 3 - for - 2 stock split. Assuming that the stock split will have no effect on the market value of its equity, what will be the company's stock price following the stock split? Round your answer to the nearest cent. $ ___96.67_____ ________________________________________ 3. Problem 15 - 3 Stock repurchases Beta Industries has net income of $3,800,000, and it has 870,000 shares of common stock outstanding. The company's stock currently trades at $70 a share. Beta is considering a plan in which it will use available cash to repurchase 15% of its shares in the open market. The repurchase is expected to have no effect on net income or the company's P/E ratio. What will be its stock price following the stock repurchase? Round your answer to two decimal places. $ _____82.36___ ________________________________________
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