Exam 13: Dividends, repurchases, and Splits

Smith Motors Inc.manufactures,distributes,and services automotive parts and engines worldwide.Smith's income statement for the year just ending is shown below.What was Smith's dividend per share in Year 1? Smith Motors Inc. Income Statement Year 1 ($000,000's)

Smith Motors Inc.manufactures,distributes,and services automotive parts and engines worldwide.Smiths' income statement for the year just ending is shown below.Assume that today is the first day of Year 2 and that Smith's common shares are trading at a price of $68.In its most recent Management Discussion and Analysis (MD&A)Smith's management forecast earnings-per-share of $6 for Year 2.If Smith maintains its Year 1 payout ratio,then what will the dividend (per share)be in Year 2? Smith Motors Inc. Income Statement Year 1 ($000,000's)

Smith Motors Inc.manufactures,distributes,and services automotive parts and engines worldwide.Smith's income statement for the year just ending is shown below.Assume that today is the first day of Year 2 and that Smith's common shares are trading at a price of $88.In its most recent Management Discussion and Analysis (MD&A)Smith's management forecast earnings-per-share of $7.5 for Year 2.If Smith maintains its Year 1 payout ratio,then what is the dividend yield (based on forecasted earnings)? Smith Motors Inc. Income Statement Year 1 ($000,000's)

Smith Motors Inc.manufactures,distributes,and services automotive parts and engines worldwide.Smith's income statement for the year just ending is shown below.Assume that today is the first day of Year 2 and that Smith's common shares are trading at a price of $88.In its most recent Management Discussion and Analysis (MD&A)Smith's management forecast earnings-per-share of $5 for Year 2.If Smith maintains its Year 1 dividend per share in Year 2,then what will its Year 2 payout ratio be? Smith Motors Inc. Income Statement Year 1 ($000,000's)

Shares of Brockshire Holding Company Inc.trade for $90,000 per share.There are 1.75 million shares outstanding.If Brockshire wanted to execute a stock split so as to reduce the stock price to $80,what split ratio would they use?

Sweetums Inc.,a confectioner best known for its chocolate ogre balls,uses the residual dividend model to set its dividends.Selected financial information for Sweetums Inc.is provided in the table below.Sweetums Inc.has many new project opportunities and so has decided to cancel its dividend this year.What is the most that it can invest in new projects using only internal equity and maintaining its target capital structure weight for equity? Selected Financial Information Sweetums Inc.

You are a buy-side analyst researching the Gorilla Glass Co.Gorilla plans to borrow $11 million by issuing bonds with an annual coupon of 7% and a yield to maturity of 7%.Gorilla will use the borrowed money to repurchase shares on the open market at $40 per share.You have gathered the information,shown in the table,regarding the company prior to the repurchase.You estimate that EBIT for Year 1 will be the same as reported for Year 0.Assume that the money is borrowed and the repurchase is executed at the beginning of Year 1. Gorilla Glass Co. Dec 31,Year 0 What is the Year 1 EPS?

Wayne Enterprises Inc.has a target debt/equity ratio of 0.1765.Its capital budget (for new projects)for next year is estimated at $110 million.Estimated net income is $100 million.Wayne Enterprises has 100 million shares outstanding.Find Wayne Enterprises dividends using the residual dividend approach.

Select financial data for Ewing Oil Inc.is provided in the table below.Ewing Oil repurchased $4.75B worth of shares during the year at an average price of $25.How many shares are outstanding at the end of the year? Ewing Oil Inc. Selected Financial Information

B&O Railroad Inc.transports industrial products and supplies throughout the North Eastern United States.Selected financial information for B&O is provided in the table below.B&O is considering a stock dividend of 10%,whereby each shareholder of record will receive one additional share for each 10 shares that they own.What will shares outstanding be after the dividend? B&O Railroad Inc. Selected Financial Information

On January 1,Year 1 you bought 100 shares of Oscorp Inc.It is now January 1 of Year 2.You have recorded stock price information for Oscorp in the table,below.You want to calculate your return on the investment.After digging through your records you realize that Oscorp executed a 3-for-2 stock split late in Year 1.Use this information to adjust the data in the table and calculate the split-adjusted annual return on the investment in Cyberdyne shares. Selected Financial Data Oscorp Inc.

Climax Motors Corp.is an all equity company with 40M shares outstanding.Climax's stock trades for $25.Climax has too much cash.The CEO,Trudy Ryder,wants to distribute the excess cash with an open market stock repurchase.She is contemplating buying back $10.9M worth of shares at a price of $25.Ricky Bobby owns 4 million shares of Climax.He purchased his shares before the repurchase for $25.If Ricky does not sell any shares during the repurchase,then what is his change in wealth from before to after the repurchase?

The CEO of Trans World Airlines (TWA),Jack Frye,wants to distribute $1B of cash by issuing a special dividend.Selected financial information for TWA is provided in the table below.Mr.Frye owns 51% of the common shares of TWA before the extra dividend.What is his total wealth in cash and shares after the special dividend? Trans World Airlines Selected Financial Information

Cash-2-Day Company currently trades for $20.Analysts regard it as fairly valued at its current price.The company has announced that it intends to spend $200.10 million on an open market repurchase.Assume that the company is able to repurchase shares at a price of $15.There are 400 million shares outstanding prior to the repurchase.What fraction of shares does the company repurchase?

Pearson Hardman Inc.currently has 2 million shares outstanding and earnings per share (EPS)of $6.After a 3-for-2 split,the shares outstanding and EPS will be:

Cash-2-Day currently trades for $13.Analysts regard it as fairly valued at its current price.The company has announced that it intends to spend $180 million on an open market repurchase.Management claims that the company's shares are occasionally undervalued and that buying shares at undervalued prices represents a good investment.Assume that the company is able to repurchase shares at a price of $12.There are 275 million shares outstanding prior to the repurchase.What stock price prevails after the repurchase?

Central Perk Coffee Co.trades for $0.85 per share and had 100M shares outstanding.It announces that it will execute a reverse-split on a 1-for-4 basis.What price will the stock trade for after the split?

Gecko & Co.uses the residual dividend model to set its dividends.Selected financial information for Gecko is provided in the table below. Selected Financial Information Gecko & Co. What is Gecko's capital structure weight for equity?

Sweetums Inc.,a confectioner best known for its mint ogre balls,uses the residual dividend model to set its dividends.Selected financial information for Sweetums Inc.is provided in the table below.Given the investment plan summarized in the table,how much new debt will it have to take on in order to maintain its target capital structure? Selected Financial Information Sweetums Inc.

GNB Inc.sets its dividend using the target payout model.Using the data in the table,below,calculate the dividend for Year 1. Selected Financial Information GNB Inc.