Essays on Stock Dividend

QUESTION 1:

INTRODUCTION: Pet.com is an e-business, founded by two graduates and Ms. Solberg, with a total equity capital of $1.5 million. Despite greater losses the company has tolerated, investors are eager to invest in the shares. Seeing the excitement, company decided to go public with the sale of 500,000 shares in initial public offering by the three existing shareholders, along with the sale of additional 750,000 shares by the company so as to provide funds for expansion. Further, the underwriters suggested placing price at $18 a share instead of $24, but financial manager was worried about the fact that ...

Question 1

A. Yes. The dividend policy of the company is paying a constant dividend, which is occasionally increased as the company grows. For instance, in the financial years ended 1999 and 2000, the company’s dividend per share was $ 1.36 when it made net income of $ 650,100,000 and $ 861,200,000 respectively. However, in the two subsequent years when the company’s net income began to increase steady, the company has increased its dividends and paid their shareholders $ 1.48 and $ 1.70 respectively. Further, in the fiscal years 2003 and 2004, the company paid $ 1.76 as dividend to its shareholders. ...

Company Information

i) NAME OF COMPANY:

The company we are analyzing is Under Armour ii) INDUSTRY - What, specifically, does your company do:

The company is engaged in the business of sports clothing, accessories and is leading supplier of casual wear and sports wear. Company also engaged in footwear business in 2005.iii) What is the address of your firm? Under Armour is headquartered both in USA and Europe. In US, company is based in Maryland and in Europe the headquarters are based in Amsterdam. For Maryland headquarters following is the complete address of the company: 1020 Hull Street

Baltimore, Maryland 21230

iv) Does your firm have a web site? If so, what is the address? Attach a copy of the home page ...

ASC 830-230-55-1: Foreign Currency Matters-Statement of Cash Flows- Implementation Guidelines and Illustrations

ASC 830-230-55-1 Provides us illustrative guidance on statement of cash flow of an entity which either have operations in foreign domicile or conduct transactions in foreign currency. Such Entity shall report the reporting currency equivalent of foreign currency cash flows using exchange rates at the time of initiation of concerned cash flow. The entity may use weighted average of exchange rates for translation if the outcome is same as if the rates at the dates of the cash flow were used. For the purpose of reconciliation of change in cash and cash equivalents, entity, in the statement of cash ...

Stock Dividends and Stock Splits

A stock split is an action by a corporation where existing shares of a specific company are subdivided into numerous shares to decrease the cash value of the individual shares. In stock split, only the number of shares increases but there is no increase in each of the shares’ dollar value. Stock splits are usually done by the company when the price of a share is has become too expensive for an investor to buy heaps of shares. An illustration of stock split is that for example, one share in Factual Company cost $1000 dollars, an investor would need $100,000 ...

Long-Term Financing

Question 1 Suppose that a firm is operating with neutral corporate and personal taxes in an otherwise perfect capital market and Equation (I6.7) currently holds. In such a world, a firm would never take on any risky debt. Why not? (Hint: Consider what would happen in financial distress). When a firm is operates in an environment with neutral corporate and personal taxes imply that the source of financing has no impact on the tax liability of the firm. Normally, companies usually borrow debt to reduce their tax liability by deducting interest expense. Interest expense is an allowable expense for tax purposes, ...

1. Bevan Industries’ current cost of capital

Discussed hereunder is the step by step calculation of Bevan Industries’ current cost of capital (Barber, 2004).

Cost of Debt (Cd) Cd = I (1 - TR)

Where I is the Interest Rate on Debt

TR is the Tax Rate Cd = {(30,000,000 X 0.06) / 25,000,000} X (1 – 0.28)

= 0.072 X 0.72 = 0.05184

= 5.184%

Cost of Common Stock (Ccs)

Based on the given information, the cost of common stock is calculated using the formula Ccs = Cd + risk premium rf = (20 X 8) / 160 = 1 (rf is the risk free rate) Ccs = 5.184 + 0.75(1)

= 5.934%.

Cost of Preferred Stock (Cps)

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