Lucie Locks Corporation has $1,000,000 in earnings after taxes and 800,000 common shares outstanding the stock trades at a P/E of 12. The company has $500,000 in excess cash. Required: 1 Compute the current price of the stock. (1 mark) 2 If the $500,000 is used to pay a dividend, how much will that dividend be per share? (1 mark) 3. If the $500,000 is instead used to repurchase shares in the market at a premium price of $20.00 how many shares will be Teacquired? (1 mark) 4 What will the new EPS be after the repurchase of the shares? (1 mark) If the P/E remains constant, what will be the new market price of the common shares be? (1 mark) Describe the two theories of dividend policy. (4 marks) Identify and briefly describe two alternatives to cash dividends. (3 marks) 5. 6 7