A firm has a total market value of assets of $300 million that includes $60 million of cash and 10 million shares outstanding. The firm uses $30 million of its cash to pay dividends. If an investor has 1000 shares, how many shares must he sell to create a homemade dividend of $3,900?

Question

Quizplus · Accepted Answer

A) Dividend payment = number of shares times dividend per share
Shares sold = (amount needed - dividend payment) / (new price per share)
Old share price = $300 million / 10 million = $30.00;
Dividend payment = $30 million / 10 million = $3.00
New share price = $30.00 - $3.00 = $27.00 11ea84dc_f4fc_7a50_9a63_972e97535d03_TB1316_00_TB1316_00

A Firm Has a Total Market Value of Assets of $300