16-20. The equity section of the balance sheet of Cafe Vienna is given next: ($ 000s) Common Stock (500,000 shares, $3 par) 1,500Capital in Excess of Par 3,500Retained Earnings 5,000Total Common Equity 10,000 The company earned a net income of $3 million this year. Historically, the company has paid dividends with a constant payout ratio of 50 percent. The stock will sell at $47 after the ex-dividend date. William Riker, the vice president of finance for Cafe Vienna, is considering all possible ways to increase the companys earnings per share (EPS). One possibility he is weighing is to buy back some of the companys outstanding shares of common stock from the market using all the net income earned this year without paying any dividend to common stockholders. a. Determine the repurchase price of the common stock.

b. Calculate the number of shares that could be repurchased using this years net income.

c. Show the changes in the equity section of the balance sheet after the repurchase.

d. If net income next year is expected to be $4 million, what would be the EPS next year with and without the repurchase?

e. If you own 50 shares of the companys common stock, would you like the companys decision of buying back the stock instead of paying a dividend?