Galles Corporate is evaluating an extra dividend versus a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65/share and the stock currently sells for $58/share. There are 2,000 shares outstanding. Ignore taxes and other imperfections in answering the first two questions below.

Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth.

What will be the effect on the companys EPS and PE ration on the two different scenarios?

In the real world, which of these actions would you recommend and why?