a$)$Everystate Inc. is evaluating an extra dividend versus a share repurchase. In either case, $$9,000$would be spent. Current earnings are $$1\mathrm{.}30$per share and the stock currently sells for $$64$per share. There are $1,000$shares outstanding. In answering the questions that follow, ignore taxes for the first two:

$*$ Evaluate the two choices in terms of their effect on the price per share of stock and shareholder wealth.

$*$ What will be the effect on Everystate$$s EPS and P$/$E ratio under the two different scenarios?

$*$In the real world, which of these choices will you recommend? Why?

b$)$At present, total dividends for each of the next two years are set equal to the cash flow of $$10,000$per year. There are $100$shares outstanding, so the dividend per share is $$100.$The price per share at the moment is $$173\mathrm{.}55$and the required return of investors is $10\%.$ There is an alternative choice of paying $$11,000$total dividends in the first year $($$$110$per share$),$followed by a liquidating dividend of $$8,900($$$89$per share$)$in the second. You prefer the first alternative but the firm$$s management adopts the second alternative. You have $50$shares to begin with and if you choose to create homemade dividends, how many shares will you have at the end of the first year?