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Problem 1 0 - 0 7 A stock is currently trading for $ 3 5 . The company has a price - earnings multiple of
Problem
A stock is currently trading for $ The company has a priceearnings multiple of There are million shares outstanding. Your model indicates that the stock is actually worth $ The company annou
that it will use $ million to repurchase shares.
a After the repurchase, what is the value of the stock, according to your model? Do not round intermediate calculations. Round your answer to the nearest cent.
$
b After the repurchase, what is the actual priceearnings multiple of the stock? Do not round intermediate calculations. Round your answer to two decimal places.
c If the company had used the $ million to pay a cash dividend instead of doing a repurchase, how would the value of the stock have changed, according to your model Do not intermediate
calculations. Round your answer to the nearest cent.
The market value of the stock is now $
d If the company had used the $ million to pay a cash dividend instead of doing a repurchase, what would be the actual priceearnings multiple after the dividend? Do not round intermediate
calculations. Round your answer to two decimal places.
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