Question
A firm is debating whether or not to conduct a share repurchase or pay a special dividend with $11,000 cash. Current EPS is $1.40 per
A firm is debating whether or not to conduct a share repurchase or pay a special dividend with $11,000 cash. Current EPS is $1.40 per share, and the 2,000 shares outstanding currently sell for $58 each. You own exactly 1 share.
a) If the firm makes the special dividend payment, what will your total wealth be?
b) If the firm repurchases shares, how many shares will be repurchased, and what will your total wealth be?
c) If the firm makes the special dividend payment, what will the P/E ratio be?
d) If the firm repurchases shares, what will the new EPS be?
*Please show your work as best as possible including formulas, Thank you*
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