1. Axel Telecommunications has a target capital structure that


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This is my weekly homework assignment for Managerial Finance. I am lost and need any help. Thanks . Finance HW..docx 1. Axel Telecommunications has a target capital structure that consists of 65% debt and 35% equity. The company anticipates that its capital budget for the upcoming year will be $3,000,000. If Axel reports net income of $1,300,000 and it follows a residual dividend payout policy, what will be its dividend payout ratio? Round your answer to two decimal places. 2. Gamma Medical’s stock trades at $145 a share. The company is contemplating a 3­for­2 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. 3. Beta Industries has net income of $300,000, and it has 985,000 shares of common stock outstanding. The company’s stock currently trades at $37 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. 4. After a 3­for­1 stock split, Strasburg Company paid a dividend of $0.8 per new share, which represents a 8% increase over last year’s pre­split dividend. What was last year’s dividend per share? Round your answer to the nearest cent. 5. Northern Pacific Heating and Cooling Inc. has a 6­month backlog of orders for its patented solar heating system. To meet this demand, management plans to expand production capacity by 50% with a $15 million investment in plant and machinery. The firm wants to maintain a 35% debt­to­total­ assets ratio in its capital structure. It also wants to maintain its past dividend policy of distributing 35% of last year’s net income. In 2012, net income was $5 million. How much external equity must Northern Pacific seek at the beginning of 2013 to expand capacity as desired? Assume the firm uses only debt and common equity in its capital structure. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 6. Residual dividend model Welch Company is considering three independent projects, each of which requires a $5 million investment. The estimated internal rate of return (IRR) and cost of capital for these projects is presented below: Project H (High risk): Cost of capital = 15% IRR = 21% Project M (Medium risk): Cost of capital = 12% IRR = 11% Project L (Low risk): Cost of capital = 7% IRR = 9% Note that the projects’ costs of capital vary because the projects have different levels of risk. The company’s optimal capital structure calls for 55% debt and 45% common equity, and it expects to have net income of $5,571,000. If Welch establishes its dividends from the residual dividend model, what will be its payout ratio? Round your answer to two decimal places. 7.Bowles Sporting Inc. is prepared to report the following 2012 income statement (shown in thousands of dollars). Sales $15,200 Operating costs including depreciation 11,400 EBIT $3,800 Interest 330 EBT $3,470 Taxes (40%) Net income 1,388 $2,082 Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 460,000 shares of stock outstanding, and its stock trades at $50 per share. a. The company had a 60% dividend payout ratio in 2011. If Bowles wants to maintain this payout ratio in 2012, what will be its per­share dividend in 2012? Round your answer to the nearest cent. $ b. If the company maintains this 60% payout ratio, what will be the current dividend yield on the company’s stock? Round your answer to two decimal places. % c. The company reported net income of $1.9 million in 2011. Assume that the number of shares outstanding has remained constant. What was the company’s per­share d

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