Question
A company is considering declaring a dividend verus a stock repurchase. Both transactions will use available cash on the company's balance sheet. If a
A company is considering declaring a dividend verus a stock repurchase. Both transactions will use available cash on the company's balance sheet. If a dividend is declared, the stock price drops, the earnings per share (EPS) remains unchanged, and the price-to-earnings (P/E) ratio drops. What happens to price, EPS, and P/E in a stock repurchase? O Price drops / EPS goes up / P/E drops to the same level as a dividend payment Price does not change / EPS remains constant / P/E drops to the same level as a dividend payment O Price does not change / EPS goes up / P/E drops to the same level as a dividend payment Price moves up / EPS goes up / P/E remains at pre-repurchase level
Step by Step Solution
3.36 Rating (162 Votes )
There are 3 Steps involved in it
Step: 1
Step 12 YOUR REQUIRED ANSWER IS OPTION D Price moves up EPS goes upPE remains at prerepur...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Financial Accounting an introduction to concepts, methods and uses
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
13th Edition
978-0538776080, 324651147, 538776080, 9780324651140, 978-0324789003
Students also viewed these Finance questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App