Question
Green Corporation is evaluating an extra dividend versus a share repurchase. In either case $5,500 would be spent. Current earnings are $.95 per share, and
Green Corporation is evaluating an extra dividend versus a share repurchase. In either case $5,500 would be spent. Current earnings are $.95 per share, and the stock currently sells for $30 per share. There are 230 shares outstanding. Ignore taxes and other imperfections.
a. What will be the effect on Green's EPS and PE ratio under the two different scenarios?
b. In the real world, which of these actions would you recommend? Why?
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Financial Management Theory And Practice
Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason
3rd Canadian Edition
017658305X, 978-0176583057
