Big Industries 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

What will be the price per share under each alternative (dividend versus repurchase)? (4 Marks)

If total earnings of the firm are $2,000 a year, find earnings per share under each alternative. (4 Marks)

Find the price-earnings ratio under each alternative. (2 Marks)