Question
Inclue Inc. is evaluating an extra dividend versus a share repurchase. In either case, $9,000 would be spent. Current earnings are $1.30 per share, and
Inclue Inc. is evaluating an extra dividend versus a share repurchase. In either case, $9,000 would be spent. Current earnings are $1.30 per share, and the stock currently sells for $64 per share. There are 1,000 shares outstanding. Ignore taxes and other imperfections in answering the first two questions.
- 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 Inclues EPS and PE ratio under the two different scenarios?
- In the real world, which of these actions would you recommend? Why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
International Finance Theory And Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J Melitz,
11th Edition
013451954X, 9780134519548
