tasmania helicopters wishes to distribute $15,000 of its earnings to its shareholders. It is deciding whether to do this through the payment of dividends or through a share repurchase. tasmania helicopters currently has 4,000 shares outstanding with a stock price of $60 per share. Its current EPS is $3. Ignore taxes and other imperfections in answering parts (a) and (b).

1. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. (6 marks)

2. What will be the effect on the companys EPS and PE ratio under the two different scenarios? (6 marks)

3. In the real world, which of these actions would you recommend? Why? (3 marks)