The equity of a certain company has a market value for $3 million. It currently has 300,000 shares outstanding, and a book value of equity of $1,095,000. An unexpected cash windfall has prompted management to consider either a special dividend of $6.00 per share or a sock repurchase for cash. Answer the following questions based on this scenario:
If management estimates that a stock repurchase announcement will increase stock price by 5 percent, how many shares should they be prepared to repurchase?
Can you think of any reasons a share repurchase might be preferable to a special dividend?

Answer rating: 100% (QA)

Noof equity shares 300000 Total Value of special dividend 6share 1800000 Market Value of 300000 sh... View the full answer