Corporate Finance

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Newcastle auto plc has a current cash flow of 4.4 million and pays no dividends. The Present value of the company ´s future cash flows is 74 million. The company is entirely financed with equity and has 800.000 shares outstanding. Assume the dividend tax is zero.

Question 1. What is the share price of the Newcastle Auto´s equity?

Question 2. Suppose the board of directors of Newcastle Autos announces it´s plan to pay out 60% of it´s current cash flow as cash dividends to it´s shareholders. How could you achieve a zero payout policy on your own, if you own 1.000 shares of Newcastle Autos equity?

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