1. JM Case Inc. has a market value of $5 million with 500,000 shares outstanding. The book value of its equity is $1,750,000. If the company repurchases 35 percent of its shares in the stock market and there are no taxes or transactions costs and all else remains the same, what should the market value of the firm be after the repurchase?
$1,000,000
$1,750,000
$3,250,000
$4,000,000
$5,000,000
2. To estimate Whistler Corporation's external financing needs, the chief financial officer needs to figure out how much equity the firm will have at the end of next year. At the end of the most recent fiscal year, Whistler's retained earnings were $135,500. The Controller has estimated that over the next year, gross profits will be $457,700, earnings after tax will total $525,400, and the dividend payout ratio is 30%. What are the estimated retained earnings at the end of next year? (Hint: Dividend Payments = Net Income (i.e., Earnings after taxes x dividend payout ratio.)
$660,900
$503,280
$293,120
$455,890