A firm has $25,000$ shares outstanding and the ex$-$dividend date is tomorrow. They will also use $$50,000$ in cash to pay those dividends tomorrow. Earnings is $$50,000.$

Assets Liabilities Equity

Cash $=$ $$150,000$ $$200,000$ $$750,000$

Other assets $=$ $$800,000$

$1.$How much will the stock price drop as the result of the firm paying dividends?

$2.$ As a shareholder, it is better to buy the stock today so that you can earn the dividend payment which will be paid tomorrow.

$3.$ Calculate the EPS of the firm after they pay $$50,000$ in dividends.

$4.$ Calculate the P$/$E of the firm after they pay $$50,000$ in dividends.

$5.$ Calculate the EPS of the firm if they decide to use $$50,000$ to repurchase stock instead of paying dividends.

$6.$ Calculate the P$/$E of the firm if they decide to use $$50,000$ to repurchase stock instead of paying dividends.