Stock repurchaseHarte Textiles, Inc., a maker of custom upholstery fabrics, is concerned about preserving the wealth of its stockholders during a cyclic downturn in the home furnishings business. The company has maintained a constant dividend payout of

$4.00

tied to a target payout ratio of

40%.

Management is preparing a share repurchase recommendation to present to the firm's board of directors.

The following data have been gathered from the last two years:

Earnings available for common stockholders 1,680,000 1,600,000 Number of shares outstanding 200,000 200,000 Earnings per share 8.40 8.00 Market price per share 47.88 40.80 Price/earnings ratio 5.7 5.1

.

a.How many shares should the company have outstanding in

2022

if its earnings available for common stockholders in that year are

$1,600,000

and it pays a dividend of

$4.00,

given that its desired payout ratio is

40%?

b.How many shares would Harte have to repurchase to have the level of shares outstanding calculated in part

a?