Chapter 18: Problems A10 & B2 (P. 542)

Chapter 18: Problems A10 & B2 (P. 542)

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Chapter 18: Problems A10 & B2 (p. 542)
Regional Software’s estimated dividends per share for next year and the next four based on Lintner’s dividend adjustment model are:

DPS1 – DPS0 = ADJ* [POR*EPS1 – DPS0]

DPS1 – 1 = 0.75* [0.25*8 – 1]

DPS1 = 0.75* [0.25*8 – 1] + 1

DPS1 = 1.75 ===> year 1 DPS

DPS2 – DPS1 = ADJ* [POR*EPS2 – DPS1]

DPS2 – 1.75 = 0.75* [0.25*8 – 1.75]

DPS2 =1.94 ===> year 2 DPS

DPS3 –DPS2 = ADJ* [POR*EPS3 – DPS2]

DPS3 – 1.94 = 0.75* [0.25*8 – 1.94]

DPS3 =1.99 ===> year 3 DPS

DPS4 –DPS3 = ADJ* [POR*EPS4 – DPS3]

DPS4 – 1.99 = 0.75* [0.25*8 – 1.99]

DPS4 =2.00 ===> year 4 DPS

DPS4 –DPS3 = ADJ* [POR*EPS4 – DPS3]

DPS4 – 2.00 = 0.75* [0.25*8 – 1.94]

DPS5 =2.00 ===> year 5 DPS

B2

Refer to EXCEL file

Chapter 20: Problem A2 (p. 603)

Option 1 has the lower cost which is equal to an annual percentage yield 9.22% compared to Option 2’s 9.36%.

For computation please refer to EXCEL file

Chapter 21: Problem B6

Please refer to EXCEL file

Complete the following problems

Chapter 17: Problem B1 (p. 500)

(Choosing financial targets) Bixton Company’s new chief financial officer is evaluating Bixton’s capital structure. She is concerned that the firm might be underleveraged, even though the firm has larger-than-average research and development and foreign tax credits when compared to other firms in its industry. Her staff prepared the industry comparison shown here.

a. Bixton’s objective is to achieve a credit standing that falls, in the words of the chief financial officer, “comfortably within the “A” range. What target range would you recommend for each of the three credit measures?

b. Before settling on these target ranges, what other factors should Bixton’s chief financial officer consider?

c. Before deciding whether the target ranges are really...