10. The equity of Enterprise Holds Inc. has a market value of $3 million. It currently has...
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10. The equity of Enterprise Holds Inc. has a market value of $3 million. It currently has 300,000 shares outstanding, and a book value of eq- uity of $1,095,000. An unexpected cash windfall has prompted man- agement to consider either a special dividend of $6.00 per share or a stock repurchase for cash.
a. If management estimates that a stock repurchase announcement will increase stock price by 5 percent, how many shares should they be prepared to repurchase?
b. Can you think of any reasons a share repurchase might be prefer- able to a special dividend?
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