Stock repurchase Harte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth

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Stock repurchase Harte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclic downturn in the home furnishings business. The company has maintained a constant dividend payout of $2.00 tied to a target payout ratio of 40%. Management is preparing a share repurchase recommendation to present to the firm's board of directors. The following data have been gathered from the last 2 years.
Stock repurchase Harte Textiles, Inc., a maker of custom upholstery

a. How many shares should the company have outstanding in 2015 if its earnings available for common stockholders in that year are $1,200,000 and it pays a dividend of $2.00, given that its desired payout ratio is 40%?
b. How many shares would Harte have to repurchase to have the level of shares outstanding calculated in part a?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Principles of Managerial Finance

ISBN: 978-0133507690

14th edition

Authors: Lawrence J. Gitman, Chad J. Zutter

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