Question

AFW Industries has 178 million shares outstanding and expects earnings at the end of this year of $703 million. AFW plans to pay out 63% of its earnings in total, paying 36% as a dividend and using 27% to repurchase shares. If AFW's earnings are expected to grow by 8.6% per year and these payout rates remain constant, determine AFW's share price assuming an equity cost of capital of 12.5%.

Answer #1

Nathan Industries (NTI) has 200 million shares outstanding. In
2020, NTI's net income will amount to $600 million. NTN has and
will continue to payout 2/3 of total earnings to share holders:
31.29% as dividend and 68.71% to repurchase its shares. We also
know that NTI's earnings will growth 5% a year, while its payout
policy will remain unchanged over the years. If NTI's equity cost
of capital is 10%, please estimate NTI's share price.
$40.00
$60.00
$80.00
$39.05

Harvey Gorman expects earnings of $$85.5
million at the end of the year (at t=1) and to pay dividends of
$$40.5 million and buy back shares worth $$11.6 million. For the
following 13years, earnings should grow at 17.4% annually (until
?=14), after which should grow at 3.5% for a long time. If the
firm’s cost of equity capital is 13.2% and the dividend and
repurchase rates are expected to stay unchanged, what is the total
market value of the Harvey...

Video New Productions (VNP) has 200 million shares outstanding.
In 2020, VNP's net income will amount to $600 million. VNP has and
will continue to payout 2/3 of total earnings to share holders:
31.29% as dividend and 68.71% to repurchase its shares. We also
know that VNP's earnings will growth 5% a year, while its payout
policy will remain unchanged over the years. If VNP's equity cost
of capital is 10%, please estimate VNP's share price.
$40.00
$60.00
$80.00
$39.05

Maynard Steel plans to pay a dividend of $ 3.17 this year. The
company has an expected earnings growth rate of 4.1 % per year and
an equity cost of capital of 9.3 %.
a. Assuming Maynard's dividend payout rate and expected growth
rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $ 1.04 this year
and use the remaining $ 2.13 per...

Maynard Steel plans to pay a dividend of $3.17 this year. The
company has an expected earnings growth rate of 4.2% per year and
an equity cost of capital of 9.3%.
a. Assuming Maynard's dividend payout rate and expected growth
rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $1.01 this year
and use the remaining $2.16 per share to repurchase shares. If...

Maynard Steel plans to pay a dividend of $3.16 this year. The
company has an expected earnings growth rate of 3.6% per year and
an equity cost of capital of 10.4%.
a. Assuming that Maynard's dividend payout rate and expected
growth rate remain constant, and that the firm does not issue or
repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of $1.07 this year
and use the remaining $2.09 per share to repurchase shares....

Maynard Steel plans to pay a dividend of $ 2.99 this year. The
company has an expected earnings growth rate of 4.3% per year and
an equity cost of capital of 10.7%.
a. Assuming Maynard's dividend payout rate and
expected growth rate remain constant, and Maynard does not issue
or repurchase shares, estimate Maynard's share price.
b. Suppose Maynard decides to pay a dividend of
$0.94 this year and use the remaining $2.05 per share to repurchase
shares. If Maynard's...

An all-equity business has 100 million shares outstanding,
selling for $20 a share. Management believes that interest rates
are unreasonably low and decides to execute a dividend
recapitalization. It will raise $1 billion in debt and repurchase
50 million shares.
Assuming the Irrelevance Proposition holds, what is the market
value of the firm after the recap? What is the market value of
equity?

Rockwood Industries has 100 million shares outstanding, a
current share price of $25, and no debt. Rockwood's management
believes that the shares are under-priced, and that the true value
is $30 per share. Rockwood plans to pay $250 million in cash to its
shareholders by repurchasing shares. Management expects that very
soon new information will come out that will cause investors to
revise their opinion of the firm and agree with Rockwood's
assessment of the firm's true value.
40. Assume...

A firm’s total annual dividend payout is $1 million. Its stock
price is $45 per share and it has 17,500,000 shares outstanding.
The firm earned $4 million in Net Income last year. This year, the
firm expects earnings to grow at 7%, with growth the year after
that expected to be 5%, and then in all following years, the firm
expects earnings to grow at 3%. The firm plans to hold their
dividend payout ratio constant over the coming 20...

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