Question
A stock is currently trading for $36. The company has a priceearnings multiple of 10. There are 100 million shares outstanding. Your model indicates that
A stock is currently trading for $36. The company has a priceearnings multiple of 10. There are 100 million shares outstanding. Your model indicates that the stock is actually worth $26. The company announces that it will use $320 million to repurchase shares.
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After the repurchase, what is the value of the stock, according to your model? Do not round intermediate calculations. Round your answer to the nearest cent.
$
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After the repurchase, what is the actual priceearnings multiple of the stock? Do not round intermediate calculations. Round your answer to two decimal places.
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If the company had used the $320 million to pay a cash dividend instead of doing a repurchase, how would the value of the stock have changed, according to your model? Do not round intermediate calculations. Round your answer to the nearest cent.
The market value of the stock is now $ .
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If the company had used the $320 million to pay a cash dividend instead of doing a repurchase, what would be the actual priceearnings multiple after the dividend? Do not round intermediate calculations. Round your answer to two decimal places.
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