Erna Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would...
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Erna Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would be spent. Current earnings are $1.60 per share and the stock currently sells for $56 per share. There are 3,500 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What will be the effect on the company's EPS and PE ratio under the two different scenarios? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price per share with dividend a. Shareholder wealth with dividend a. Price per share with repurchase a. Shareholder wealth with repurchase b. EPS with dividend b. PE with dividend b. EPS with repurchase b. PE with repurchase Erna Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would be spent. Current earnings are $1.60 per share and the stock currently sells for $56 per share. There are 3,500 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. What will be the effect on the company's EPS and PE ratio under the two different scenarios? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price per share with dividend a. Shareholder wealth with dividend a. Price per share with repurchase a. Shareholder wealth with repurchase b. EPS with dividend b. PE with dividend b. EPS with repurchase b. PE with repurchase
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Answer rating: 100% (QA)
To evaluate the two alternatives extra dividend and share repurchase we can follow these steps a Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholde... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan
Posted Date:
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