18. The Off-Shore Steel Company has earnings available for common stockholders of $2 million and has...

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18. The Off-Shore Steel Company has earnings available for common stockholders of $2 million and has 500,000 shares of common stock outstanding at $60 per share. The firm is currently contemplating the payment of $2 per share in cash dividends. 1. 2. 3. 4. 5. 6. Calculate the firm's current earnings per share and price/earnings ratio. If the firm can repurchase stock at $60 per share in the open market, how many shares can it buy back in lieu of paying a dividend? How much will the EPS be after the proposed repurchase? Why? Assuming a perfect market, what is the market price of the stock after repurchase? What is the P/E ratio? Compare the earnings per share before and after the proposed repurchase. Compare and contrast the stockholders' position under the dividend and repurchase alternatives. 18. The Off-Shore Steel Company has earnings available for common stockholders of $2 million and has 500,000 shares of common stock outstanding at $60 per share. The firm is currently contemplating the payment of $2 per share in cash dividends. 1. 2. 3. 4. 5. 6. Calculate the firm's current earnings per share and price/earnings ratio. If the firm can repurchase stock at $60 per share in the open market, how many shares can it buy back in lieu of paying a dividend? How much will the EPS be after the proposed repurchase? Why? Assuming a perfect market, what is the market price of the stock after repurchase? What is the P/E ratio? Compare the earnings per share before and after the proposed repurchase. Compare and contrast the stockholders' position under the dividend and repurchase alternatives.