Question
Flychucker Corporation is evaluating an extra dividend versus a share repurchase. In either case $16,000 would be spent. Current earnings are $1.60 per share, and
| Flychucker Corporation is evaluating an extra dividend versus a share repurchase. In either case $16,000 would be spent. Current earnings are $1.60 per share, and the stock currently sells for $64 per share. There are 5,000 shares outstanding. Ignore taxes and other imperfections. |
| a. | Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
| Alternative I | Extra dividend |
| Price per share | $ |
| Shareholder wealth | $ |
| Alternative II | Repurchase |
| Price per share | $ |
| Shareholder wealth | $ |
| b. | What will be the effect on Flychuckers EPS and PE ratio under the two different scenarios? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
| Cash dividend | |
| EPS | $ |
| PE ratio | |
| Share repurchase | |
| EPS | $ |
| PE ratio | |
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Emotions In Finance Booms Busts And Uncertainty
Authors: Jocelyn Pixley
2nd Edition
1107633370, 978-1107633377
