A corporation is evaluating an extra dividend versus an open market share repurchase
Question # 00004838
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Updated on: 12/07/2013 08:42 AM Due on: 12/07/2013
A corporation is evaluating an extra dividend versus an open market share repurchase. in either case, $16,000 would be spent. current earnings are $4.5 per share. and the stock currently sells for $80 per share. there are 2000 shares outstanding. ignore taxes and other imperfections in answering the following two questions: 1, what is the stock price, EPS, P/E ratio and total equity value if the firm chooses to do a repurchase? 2,what is the stock price, EPS, P/E ratio and total equity value if the firm chooses to pay dividend?
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Solution: A corporation is evaluating an extra dividend versus an open market share repurchase