1. Repurchase versus Cash Dividend Gothic Corporation is deciding whether

to pay out $500 in excess cash in the form of an extra dividend or a share repurchase. Current earnings are $2.50 per share, and the stock sells for $25. The market value balance sheet before paying out the $500 is as follows:

Evaluate the two alternatives in terms of the effect on the price per share of the stock, the EPS, and the PE ratio