Taco Time Corporation is evaluating an extra dividend versus a share repurchase. In either case, $12,880 would be spent. Current earnings are $3.15 per share, and the stock currently sells for $73 per share. There are 4,600 shares outstanding. Ignore taxes and other imperfections in answering (a) and (b) below:

a.) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth.

b.) What will be the effect on the companys EPS and PE ratio under the two different scenarios?

c.) In the real world, which of these two actions would you recommend? Why?