Question: Max Firm is evaluating an extra dividend versus a share repurchase. In either case, $16,320 would be spent. Current earnings are $3.10 per share, and

Max Firm is evaluating an extra dividend versus a share repurchase. In either case, $16,320 would be spent. Current earnings are $3.10 per share, and the stock currently sells for $85 per share. There are 3,400 shares outstanding. Ignore taxes and other imperfections.

What will be the effect on max’s EPS and PE ratio under the two different scenarios?

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EPS 31 MPS 85 274194 Shrs os 3400 Amt spent 16320 Stock repurchase Stock ... View full answer

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