Question
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
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 $2.00 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:
a.How many shares should the company have outstanding in 2019 if its earnings available for common stockholders in that year are $1,100,000 and it pays a dividend of $2.00, 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?
a. The number of shares the company should have outstanding is ____ shares.(Round to the nearest whole number.)
b. To have the level of shares outstanding calculated in part a, the number of shares Harte would have to repurchase is ______ shares.(Round to the nearest whole number.)
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