12. Stock Repurchase (L04] Awake Corporation is evaluating an extra dividend versus a share repurchase. In either case, $17,500 would be spent. Current earnings are $1.89 per share, and the stock currently sells for $64 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections in answering the first two questions. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. b. What will be the effect on the company's EPS and PE ratio under the two different scenarios? c. In the real world, which of these actions would you recommend? Why? 604 Input Area: Extra dividend Earnings per share Price per share Shares outstanding $ $ $ 17.500 1,89 64 2.000 Output Area: 8,75 a. Cash Dividend: DPS $ Price per share The wealth of a shareholder who is holding one share is Repurchase: Shares repurchased 273,44 If you choose to let your shares be repurchased, you have $ $ 64,00 in cash. If you keep your shares they are still worth $ 64,00 b. Cash Dividend: EPS P/E Repurchase: EPS P/E c. A share repurchase would seem to be the preferred course of action. Only those shareholders who wish to sell will do so, giving the shareholder a tax timing option that he or she doesn't get with a dividend payment