The Carlton Corporation has $6 million in earnings after taxes and 3 million shares outstanding. The stock trades at a P/E of 25. The firm has $5 million in excess cash.

a. Compute the current price of the stock.

Note: Do not round intermediate calculations and round your answer to 2 decimal places.

b. If the $5 million is used to pay dividends, how much will dividends per share be?

Note: Do not round intermediate calculations and round your answer to 2 decimal places.

c. If the $5 million is used to repurchase shares in the market at a price of $55 per share, how many shares will be acquired?

Note: Do not round intermediate calculations and round your answer to the nearest whole share.

d. What will the new earnings per share be?

Note: Use the rounded number of shares computed in part c but do not round any other intermediate calculations. Round your answer to 2 decimal places.

e-1. If the P/E ratio remains constant, what will the price of the securities be?

Note: Use the rounded answer from part d and round your answer to the nearest whole dollar.

e-2. By how much, in terms of dollars, did the repurchase increase the stock price?

Note: A negative value should be indicated with a minus sign. Round your answer to the nearest whole dollar.

f. Has the stockholders total wealth changed as a result of the stock repurchase as opposed to receiving the cash dividend?

multiple choice

Yes

No