Question
A firm has a market value equal to its book value. Currently, the firm has excess cash of $80000 and other assets of $420,000. Equity
A firm has a market value equal to its book value. Currently, the firm has excess cash of $80000 and other assets of $420,000. Equity is worth $500,000. The firm has 20000 shares of stock outstanding and net income of $25,000.
- What will the stock price, the earnings per share (EPS), and the Price to earnings ratio (P/E) be if the firm uses all its excess cash to complete a stock repurchase?
- What will the stock price, the earnings per share (EPS), and the Price to earnings ratio (P/E) be if the firm uses all its excess cash to distribute a special dividend to all shareholders?
- Is share repurchase a perfect alternative to cash dividend distribution?
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International Marketing And Export Management
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
8th Edition
9781292016924
