3. Blue Company has a market-value of assets of $50,000. This company has a D/E ratio of 0.25. There are 1,000 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,000 worth of stock. Ignore taxes.

1. What will be the price per share under each alternative (dividend versus repurchase)?

2. Find earnings per share for both alternatives when total earnings of the firm are $5,000 a year.

3. Find the price-earnings ratio for both alternatives.