Lyle Communications had finally arrived at the point where it had a sufficient excess cash flow of $2.4 million to consider paying a dividend. It had 2 million shares outstanding and was considering paying a cash dividend of $1.20 per share. The firms total earnings were $8 million, providing $4 in EPS. Lyle Communications shares traded in the market at $64. However, Liz Crocker, the chief financial officer, was not sure that paying the cash dividend was the best route to go. She had recently read a number of articles in The Globe and Mail about the advantages of stock repurchases and, before she made a recommendation to the board of directors, she decided to do a few calculations.

1. What is the firms P/E ratio?

2. If the firm paid the cash dividend, what would be its dividend yield and dividend payout per share?

3. If a shareholder held 100 shares and received the cash dividend, what would be the total value of the shareholders portfolio?