Total annual dividend income


Webster's is an all-equity firm that has 20,000 shares of stock outstanding at a market price of $45 a share. The firm has earnings before interest and taxes of $60,000 and has a 100 percent dividend payout ratio. Ignore taxes. Webster's has decided to issue$200,000 of debt at a rate of 9 percent and use the proceeds to repurchase shares. Adam owns 100 shares of Webster's stock and has decided to continue holding those shares. Once Webster's issues the debt, Adam's total annual dividend income from these shares will:

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Accounting Basics: Total annual dividend income
Reference No:- TGS091152

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