Corporate Finance

CASE 3 (25 points) BPI Corporation has the following marketvalue balance sheet. The stock currently sells for 20 a share, and there are 1,000 shares outstanding. The firm will either pay a 21 per share dividend or repurchase 1,000 worth of stock. For the purpose of this minicase please ignore taxes. Assets Liabilities and Equity Cash 2,000 Debt 10,000 Fixed assets 28,000 Equity 20,000 Instructions: a. what will be the subsequent price per share if the rm pays a dividend? (3 points) b. What will be the subsequent price per share if the firm repurchases stock? (4 points) c. If total earnings of the rm are 2,000 a year, find earnings per share if the rm pays a dividend. (3 points) d. Please calculate the earnings per share if the rm repurchases stock. (4 points) e. Find the price-earnings ratio ifthe firm pays a dividend. (3 points) f. Find the priceearnings ratio if the firm repurchases stock. (4 points) g. Why would a stock repurchase make more sense than an extra cash dividend? What is the effect ofa stock repurchase on a firm's earnings per share? Its price-earnings ratio? (4 points)