5) How would the suggested debt reduction affect the companys P/E ratio, ROA and ROE?

6) How would the suggested share repurchase affect the companys P/E ratio, ROA and ROE?

7)Would you regard a $2 million cash reserve as sufficient for the company? Explain

Welsh Company is small but rapidly growing biotechnology company with annual revenues of $115 million. Last year's net income was $6.38 million. The company which was founded by two brothers went public in 2015. By issuing 2.8 million shares at $19.$53.2 million of equity were raised. Two years later, Welsh Company made its first annual dividend payment of $0.40 which increased by 15% the following year. Recently, due to increase in the sales of a newly developed drug, the company's last quarter earnings are up 37% compared to the previous quarter. The two founders are optimistic about the company's future and they feel it is time to reward its shareholders with either a special one-time dividend of $2.5 or an increase in the annual dividend of $1. The company's Chief Finance Officer, has another suggestion which is using half of the accumulated cash of $12 million to initiate a buy-back. Due to the global financial crisis, the company's shares dropped significantly and are currently trading at $17.50, down 32% from the peak price. Additionally, the CFO would like to reduce the company's debt by $4 million, thereby maintaining a cash reserve of only $2 million