Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Stock repurchase the following financial data on the Bond Recording Company are available: 6 The firm is currently considering whether it should use $450,000 of
Stock repurchase the following financial data on the Bond Recording Company are available: 6 The firm is currently considering whether it should use $450,000 of its earnings to help pay cash dividends of $1.80 per share or to repurchase stock at $18 per share. a. Approximately how many shares of stock can the firm repurchase at the $18-per-share price, using the funds that would have gone to pay the cash dividend? b. Calculate the EPS after the repurchase. c. If the stock still sells at 8 times earnings, what will the market price be after the repurchase? d. Compare the pre- and post-repurchase earnings per share. e. Compare and contrast the stockholders' positions under the dividend and repurchase alternatives. What are the tax implications under each alternative? ..... a. The number of shares Bond can repurchase is (Round down to the nearest whole number.) - Data table Earnings available for common stockholders Number of shares of common stock outstanding Earnings per share ($500,000 = 250,000) Market price per share Pricelearnings (P/E) ratio ($16 - $2) $500,000 250,000 $2 $16 8
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started