Question

7. As the CFO, you are responsible for managing the dividend and stock buyback programs which return capital to shareholders. For 2019, the dividend is paid quarterly and is currently $0.08 per share each quarter. There are 82 million shares outstanding. How much money will be returned to shareholders through dividends in 2019? (2pts) 8. In 2011, the quarterly dividend was $0.055 per share. What is the dividend growth rate from 2011 to 2019? (2pts) 9. If this dividend growth rate was sustainable into perpetuity, and if the cost of capital was the yield to maturity of the outstanding debt, what would a fair share price of the common stock of Wolverine World Wide be to an investor? (5pts) 10. The 2018 EBIT of Wolverine World Wide was $210 million up from $181 million in 2015. What is the rate of growth of the EBIT? (2 pts) 11. If the corporate tax rate is currently 27%, what would a fair enterprise value of Wolverine World Wide be based on their Free Cash Flow growth? (5pts) 12. Given the 82 million shares outstanding, what share price would this enterprise value represent? (2pts)

Looking for answers 7-12 in this post, posted questions 1-6 with the needed information for the questions.

Answer 1

Qs 7. Quarterly Dividend / Per share = $.08 , Annual Dividend = $.08*4 = $0.32 per Share

Total Shares Outstanding = 82 Million, Total Dividend Payout = 82 Million * $0.32 = $26.24 Millions

Qs 8. In this question, Compound annual growth rate will be applicable.

2011 Yearly dividend payout = $0.055*4 = $0.22

2019 Yearly dividend payout = $0.08*4= $0.32

Compound Annual Dividend growth Rate = ((0.32/0.22)^(1/8))-1 = 4.80%

Qs 10. 2018 EBIT = $210 , 2015 EBIT = $181

Rate of growth = ((210/181)^(1/3))-1 =5.08%

Qs.12 on Dividend discount Model , Share Price P= D/(r-g)

P= Share Price, r= expected rate of return, g=growth rate of dividend

P= $0.32/(5.08% - 4.80%)=$112.9365

Enterprse Value = 82 million shares X Share price $112.9365 = $9260.795 Millions.

Qs.11 = If the Tax rate is 27% , then it will be deducted from dividend.

2019 Dividend = $0.32 , post Tax adjusted = $0.32*(1-27%) = $0.2336

Share Price on Constant growth Model = $0.2336/(5.08%-4.80%) = $82.444

Total Enterprise Value = No of shares outstanding X share price = 82 Millions X $82.444 = $6760.38 Millions