Axer Corp wishes to distribute $15,000 of its earnings to its shareholders. It is deciding whether to do this through the payment of dividends or through a share repurchase. Axer Corp currently has 4,000 shares outstanding with a stock price of $60 per share. Its current EPS is $3. Ignore taxes and other imperfections in answering parts (a) and (b).

1. What are two alternatives in terms of the effect on the price per share of the stock and shareholder wealth?
2. What will be the effect on the companys EPS and PE ratio under the two different scenarios?
3. Which of these actions would you recommend?