Question 1 (25 marks) The firm is evaluating a cash dividend versus a stock repurchase. In either case, $8,000 would be spent. Current earnings are $2 per share, and the stock currently sells for $50 per share. There are 1,000 shares outstanding. Ignore taxes, transaction cost and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. Support your analysis with calculations. (10 marks) b. What is the effect of these two payout policies on its EPS and PE ratio (cash dividend versus stock repurchase)? Support your analysis with calculations. (9 marks) c. List 3 possible reasons for a company to consider a share buyback (6 marks)