Beranger Corporation has the following market-value balance sheet. The stock currently sells for 20 a share, and there are 1,000 shares outstanding. The firm will either pay a 1 per share dividend or repurchase 1,000 worth of stock. Ignore taxes.

Assets Liabilities and Equity

Cash 2,000 Debt 10,000

Fixed assets 28,000 Equity 20,000

g. Why would a stock repurchase make more sense than an extra cash dividend? What is the effect of a stock repurchase on a firms earnings per share? Its price-earnings ratio? (4 points)