Stocks & Perspective of Corporate Finance - Assignment Example

Stocks and perspectives of corporate finance al Affiliation a How much is the company behind in preferred dividends?Annual dividend for preferred stock $8 per shareNumber of preferred stock- 350,000Duration of unpaid preferred dividends- 5 yearsb.) NHC earns $13,500,000 in the sixth year after taxes, but before dividends.Preferred dividends arrears after the sixth year= If all the earnings ($13,500,000) are paid out to the preferred stockholders, the arrears would be;2.) The year’s earnings of $120 million must be apportioned to dividends and retained earnings (72 million).

The dividends amounted to:Therefore, the payout ratio is; Dividends: Retained earnings 2: 33.) a.) From a legal perspective, the maximum amount of dividends per share the firm could pay is: + Per share+$1= $4.881b.) In terms of cash availability, the maximum amount of dividends per share the firm could pay is: $3.881c.) If the firm earned 18% return on stockholder’s equity in the last year, total earnings would have amounted to; If 50% of earnings are paid out in the form of dividends, dividends amount to; Therefore, dividends per share will amount to; 599,050/295,000 $2.

03 per share4.) Earnings after taxes $5 million,2 million shares outstanding,Price per earnings per share=20, andThe firm has $4 million in excess casha.) Compute the current price of the stockP/E= Market price per share/ Annual earnings after taxes per share.Let the market price per share be represented by ‘X.’X=20*2.5The current price of the stock equals $50b.) If the $4 million (excess cash) paid dividends, dividends per share would be,c.) If the $4 million is used to repurchase shares at a price of $54 per share, the total number of shares acquired would be;1 share= $54X shares= $4 millionCross multiply to find ‘X’d.) The new earnings per share will be;Total shares= 2,000,000+74,074= 2,074,074 sharesEarnings per share: e.) If the P/E ratio remains constant, the price of the securities would be;The repurchase increased the stock price by;f.) The stockholders wealth increases after the repurchase of 74,074 shares with the excess cash ($4 million).

If the excess cash had been used to pay dividends, shareholders would have earned $2 per share, whereas they earn $2.41 per share after the repurchase.g.) Reasons as to why a corporation may wish to repurchase its shares in the market:A corporation’s shares may be a real value opportunity, and it may repurchase them in the open market while they are still cheap.To portray itself as a value investor; just as any other individual.A corporation may conduct a stock buyback if it speculates that its share price will rise.

To reduce the number of shares in the open market, this reduces the risk of a hostile takeover.To conceal poor performance (Marston, 2014).5.) a.) Barnes Enterprises offers its shares to Noble Corporation for an equal number of shares. Barnes original shares after the merger: Post-merger earnings per share for Barnes Enterprises will be;b.) The earnings per share of Barnes Enterprises changed because; after the share-for-share offer both pre-merger firms (Noble Corporation and Barnes Enterprises) became owners of the merged firm.c.) We can not necessarily assume that Barnes Enterprises is better off after the merger.

Although the earnings per share for Barnes Enterprises increase from $2 to $2.6, its price-earnings (P/E) reduce from 28X to 21X ()Question 6a.) Institutional investors in Wal-mart have 3,224,000 shares outstanding that are worth $72,724,000. They have a 30.29% institutional ownership. In Target Corporation, institutional investors have a 28% institutional ownership.b.) In Wal-mart, institutional investors increase the share capital by 30.29%. Such a shareholding is has a material effect on the company’s retained earnings.

In Target Corporation, institutional ownership has a significant portion of share capital. Institutional investors have diversified the range of investments, therefore increasing cash from investing activities.c.) In Wal-mart, James W. Breyer and Gregory B. Penner are both institutional investors. In Target Corporation, Mary E. Minnick is the only institutional investor in the board of directors.Question 7In Wal-mart, there are 15 members in the board of directors. Seven (7) of them are employees.

The longest serving board of director is Douglas N. Daft while the shortest serving board of director is H. Lee Scott, Jr.In Target Corporation, there are 12 members in the board of directors. Ten (10) of them are employees. The longest serving director is James A. Johnson while the shortest serving director is Mary E. Minnick.ReferenceMarston, R. C. (2014). Investing for a lifetime managing wealth for the "new normal". Hoboken, N.J.: Wiley.