Case 19 Georgia Atlantic Company Dividend Policy CASE INFORMATION Purpose The purpose of this case is to have students examine dividend policy--cash dividends‚ stock splits‚ and stock dividends--from the viewpoint of its effect on corporate share prices. Time Required About one and a half hours of student preparation. If the case is to be written up and handed in‚ double the time required. Complexity A--relatively simple. Flexibility This case can be used in
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Sales $ 3‚000 Cost of goods sold (1‚600) Gross profit $ 1‚400 Operations expenses (970) Operating income $ 430 Interest expense (30) Income before tax $ 400 Income tax (200) Net income $ 200 Plus Jan. 1 retained earnings 150 Minus dividends (100) Dec. 31 retained earnings $ 250 Answer (A) is correct. (CIA‚ adapted) REQUIRED: The return on assets. DISCUSSION: The return on assets is the ratio of net income to total assets. It equals 21.1% ($200 NI ÷ $950 total assets). Answer
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Corporation (ICC) has been outstanding‚ there are some problems in respect of the share price appreciation. Firstly‚ P/E ratio will be used to evaluate the company’s stock and factors which affect company’s P/E ratio will be listed. Furthermore‚ discounted dividend valuation model will be demonstrated and fundamental factors which impact the share pricing will be analysed. Finally‚ the value of ICC at 30 June 2010 will be calculated using P/E ratio and DDM model. Meantime‚ the weakness of those two models will
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How to Value Bonds 1. What is the present value of a 10-year‚ pure discount bond paying $1‚000 at maturity if the appropriate interest rate is: a. 5 percent? b. 10 percent? c. 15 percent? 2. Microhard has issued a bond with the following characteristics: Principal: $1‚000 Time to maturity: 20 years Coupon rate: 8 percent‚ compounded semiannually Semiannual payments Calculate the price of this bond if the stated annual
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ratio.It may mislead some of investors to buy the stock . Apart from PE ratio‚ Dividend Discount Model (DDM) will be a better way to value the stock price. The DDM model seeks to value a stock by using predicted dividends and discounting them back to their present value. The Formula of DDM is Dividend per share over discount rate minus dividend growth rate. Value of Stock = D1 R- G Where‚ • DPS (1) = Dividends per
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ratio analysis and might have a significant impact in our investment decision making process. Dividends Payments and Dividend Yield Cash dividends per share | | | | Year | 31/03/2008 | 31/03/2009 | 31/03/2010 | Company | | | | Toyota | | ¥ 140.00 | ¥ 100.00 | ¥ 45.00 | Honda | | ¥ 86.00 | ¥ 63.00 | ¥ 38.00 | | | | | | | | | | | Estimated dividend yield* % | | | | Year | 31/03/2008 | 31/03/2009 | 31/03/2010 | Toyota | | 2.82% | 3
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To: Date: From: Subject: Next pc is a uk based retailer that sells moderately price clothing for men‚ women and children. It also specialize in housewives and furnitures through 500 stores primarily in uk and irelandl. It also franchise more than 200 stores in asia nad Europe counties. Profitability The primary financial indicator is the roce which has shown an increases to 53.4 % in 2012 from 52.09 %. But‚ if the capital employed included the new £300m committed bank facility that yet drawn
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The Gordon growth model‚ developed by Gordon and Shapiro‚ assumes that dividends grow indefinitely at a constant rate. Here‚ Vo = Value of the share r = Required rate of Return g = Dividend growth rate For our calculation we have taken‚ * Required Rate of return as Cost of Capital * Dividend growth rate as CAGR of last 8 yrs dividend rate * CAGR of Dividend (last 8 yrs) = 20.49 * Last dividend distributed = 110 Valuation as per Gordon’s Model = 1015.385 1015
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Stock Valuation Problems Handout 1. ABC Company’s stock pays a fixed dividend of $2. If an investor’s required rate of return is 8%‚ then what is the value of the stock? $25 2. DEF Ltd. has stock outstanding that pays a fixed $5 dividend and currently markets for $22. What is the expected rate of return for the stock? 22.7% 3. GHI Inc.’s stock is selling for $33 in the market and pays a $3.60 annual dividend. a. If you purchase the stock at its current price‚ what will be the expected
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assumed market risk premium is assumed at being 7.5%. Information gathered from the XYZ Stock Information page (downloaded via IP assignment) reveals the following values: * XYZ’s beta (β) = 1.64 * XYZ’s current annual dividend = $0.80 * XYZ’s 3-year dividend growth rate (g) = 8.2% * Industry Price/Earnings (P/E) = 23.2 * XYZ’s Earnings Per Share (EPS) = $4.87 * U.S. 10-year Treasury bond (risk free rate) = 2.6% * Market Risk Premium = 7.5% 1. Using CAPM (Brooks
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