Finance and Value Creation

Finance and Value Creation

Problem One

Ex-Dividend share price

Ex-Dividend Share price

= Share price before Dividend – Dividend about to pay

= $76 – ((6.5 * (1-0.12))

= $70.28

Problem Two

• Five-to-three stock split

= previous stock price / the split ratio

= $72/ (5/3)

= $43.2

• 12% stock dividend

= Share price before Dividend – Dividend about to pay

= $72 – (0.12 * 72)

= $63.36

• 45% stock dividend

= $72 – (0.45 * 72)

= $39.6

• Five for seven reverse stock split

= $72 / (5/7)

= $100.8

Problem Three

Dividend for Year-1

D 1 = D + F x [(E x T) – D0]

Where,

D = DPS for year 0

F = Speed Ad