Brutus Co. expects an EPS of $10 per share next period. Curr…

Brutus Co. expects an EPS of $10 per share next period. Currently, their plowback ratio is 0.5. However, the company has the opportunity to finance a new project that will earn an ROE of 9% by cutting its dividend to $2.50 per share. If the Brutus Co’s expected stock return is 9%, should they cut dividends to make the new investment?

Brutus Company has announced plans to acquire Buckeye Enterp…

Brutus Company has announced plans to acquire Buckeye Enterprises. Brutus is trading for $25 per share and Buckeye is trading for $30 per share, with a pre-merger value for Buckeye of $3 billion dollars. If the projected synergies from the merger are $650 million, what is the maximum exchange ratio that Brutus could offer in a stock swap and still generate a positive NPV?

Assume Brutus Co. has $10 million in excess cash and no debt…

Assume Brutus Co. has $10 million in excess cash and no debt. The firm expects to generate additional free cash flows of $40 million per year in subsequent years which they can pay out as a dividend. If Brutus’s unlevered cost of capital is 8%, then the enterprise value of its ongoing operations is PV(FCFs) = $40 million/8% = $500 million.Brutus’s board is meeting to decide how to pay out its $10 million in excess cash to shareholders. The board is considering two options: 1) Use the $10 million to pay a $1 cash dividend for each of Brutus’s 10 million outstanding shares2) Repurchase shares instead of paying a dividend In perfect capital markets, which would investors prefer?