1Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $0.80 out of annual earnings per share of $2.50. Currently, Rubenstein Bros. stock is selling for $11.00 per share.Adhering to the company's target capital structure, the firm has $8 million in total invested capital, of which 50% is funded by debt. Assume that the firm's book value of equity equals its market value.In past years, the firm has earned a return on equity (ROE) of 17%, which is expected to continue this year and into the foreseeable future.Retention rate x ROE.) Do not round intermediate calculations. Round your answer to twoa. Based on this information, what long-run growth rate can the firm be expected to maintain? (Hint: gdecimal places.b. What is the stock's required return?%RLLc. If the firm changed its dividend policy and paid an annual dividend of $1.60 per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE.Therefore, what must the firm's new expected long-run growth rate? Do not round intermediate calculations. Round your answer to two decimal places.%If this plan is implemented, what must the firm's required return be? Do not round intermediate calculations. Round your answer to two decimal places.%d. Suppose instead that the firm has decided to proceed with its original plan of disbursing $0.8 per share to shareholders, but the firm intends to do so in the form of a stock dividend rather than acash dividend. The firm will allot new shares based on the current stock price of $11.00. In other words, for every $11.00 in dividends due to shareholders, a share of stock will be issued. How largewill the stock dividend be relative to the firm's current market capitalization? (Hint: Remember market capitalization = Po x number of shares outstanding.) Do not round intermediate calculations.Round your answer to two decimal places.e. If the plan in part d is implemented, how many new shares of stock will be issued? Do not round intermediate calculations. Round your answer to the nearest whole number.sharesf5%VIf the plan in part d is implemented, by how much will the company's earnings per share be diluted? Do not round intermediate calculations. Round your answer to the nearest cent.per share$%****5TGQ Searchf6notB106Yintermediate calculations. Round your answer to two decimal places.H&7Nf8U*4+8fgJOhpKAA9KALMf10►IIaltOf11TAIPctrlf12a X✈[+66insAUER 42prt sc1↑pause1deletebackspaceVhomeenter4x bnumlockT shift7home7:40 PM11/28/2023end+↓8end

Name: 1Rubenstein Bros. Clothing is expecting to pay an annual dividend per
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Description: 1Rubenstein Bros. Clothing is expecting to pay an annual dividend per share of $0.80 out of annual earnings per share of $2.50. Currently, Rubenstein Bros. stock is selling for $11.00 per share.Adhering to the company's target capital structure, the

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a. Based on this information, what long-run growth rate can the firm be expected to maintain? (Hint: g = Retention rate x ROE.) Do not round intermediate calculations. Round your answer to two decimal places. % 4 b. What is the stock's required return? Do not round intermediate calculations. Round your answer to two decimal places. % ruture. c. If the firm changed its dividend policy and paid an annual dividend of $1.60 per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE. Therefore, what must the firm's new expected long-run growth rate? Do not round intermediate calculations. Round your answer to two decimal places. % If this plan is implemented, what must the firm's required return be? Do not round intermediate calculations. Round your answer to two decimal places. % d Su d that the 6

a. Based on this information, what long-run growth rate can the firm be expected to maintain? (Hint: g = Retention rate x ROE.) Do not round intermediate calculations. Round your answer to two decimal places. % 4 b. What is the stock's required return? Do not round intermediate calculations. Round your answer to two decimal places. % ruture. c. If the firm changed its dividend policy and paid an annual dividend of $1.60 per share, financial analysts would predict that the change in policy will have no effect on the firm's stock price or ROE. Therefore, what must the firm's new expected long-run growth rate? Do not round intermediate calculations. Round your answer to two decimal places. % If this plan is implemented, what must the firm's required return be? Do not round intermediate calculations. Round your answer to two decimal places. % d Su d that the 6

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 4P

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