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What is Cockatoo Bakeries Dividend Impact Analysis about?

Cockatoo Bakeries Ltd operates three bakeries generating free cash flows totaling $1,400,000 annually, with a cost of capital of 10%. The current share price is $1.40, and after a proposed increase in dividends to $0.74 funded by selling the Campbelltown Bakery, the share price would drop to $0.80, leaving shareholder wealth unchanged at $1.54 per share. In a perfect capital market, the increase in dividends does not affect overall shareholder wealth due to the M&M irrelevance proposition.

Author

cblinh12062005

Language

EN