Laughingtree Ltd. is considering rewarding its shareholders with a total of $40,000. There are 10,000 shares outstanding.
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Laughingtree Ltd. is considering rewarding its shareholders with a total of $40,000. There are 10,000 shares outstanding. Currently the EPS is $2 per share and the stock is selling for $60 per share.
i) What would be the effect on per share stock price and shareholders' wealth if the company decided to pay dividends? What would happen if it went for a share repurchase instead? Ignore taxes.
ii) What would be the impact of a dividend on the company's P/E? What will it be if there was a repurchase?
iii) Under the given scenario, which alternative would you want the firm to choose: A dividend or a repurchase? Why?
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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