Question: Using excel 6. DB, Inc. is publicly traded with a stock price of $30 per share and 100,000,000 shares outstanding. It also expects to have

Using excel 6. DB, Inc. is publicly traded with a stock

Using excel

6. DB, Inc. is publicly traded with a stock price of $30 per share and 100,000,000 shares outstanding. It also expects to have total net earnings of $300,000,000. DB has $100 million in surplus cash that it wants to pay to shareholders. One option is to pay a special dividend. The other option is to repurchase stock with the cash. Evaluate the two alternatives below (ignoring any information effects): a. What is the price of the company's stock if it announces i. a special dividend will be paid (with all $100 million) ii. stock will be repurchased (totaling $100 million) on the open market b. What is the EPS of the company if it i. pays a special dividend with all $100 million ii. repurchases stock totaling $100 million on the open market c. What is the P/E ratio of the company if it i. pays a special dividend with all $100 million ii. repurchases stock totaling $100 million on the open market d. Give two reasons why the company should choose to pay the special dividend and two reasons why the company should repurchase the stock

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