8D Peter Limited has 10 million outstanding shares, and the firm has no debt and...
80.2K
Verified Solution
Link Copied!
Question
Finance
8D Peter Limited has 10 million outstanding shares, and the firm has no debt and the cost of equity is 10%. The company has $50 million excess cash and $x of other assets.
For the $50 million excess cash, the board is considering that whether it would be paid out as a special dividend or to use it to repurchase shares of the firm's stock. For the $x of other assets, it is expected that those assets could generate free cash flows of $40 million at the end of each year in the future, and the firm will pay out the entire amount of free cash flows as regular dividend at the end of each year.
Assume Peter Limited spent $50 million excess cash to repurchase shares, but you would like to have special dividend by considering homemade-dividend. Assume you have 2500 shares of the stock issued by Peter Limited. To receive the same amount of cash as if special dividend is paid by the company, what is the number of shares that you have to sell?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
