The following data apply to Elizabeth's Electrical Equipment:

Value of operations	$30,000
Short-term investments: Cash	$2,000
Debt	$5,000
Number of shares	500
Net Income	$4,000
Current Share Price	$45.00

The company plans on distributing the $2,000 in Cash. They can either do so with a Re-Purchase or with a Cash Dividend. Which should they choose and how will it affect their Share Price, Earnings per Share (EPS), and P/E ratio?

Current: Provide the Ex-ante information for the firm: EPS and P/E ratio.

• Total Firm Value (i.e. Assets) = Value of Operations + Value of Non-Operating Assets
  • Value of Equity = Total Firm Value - Debt

Dividend: If they pay a dividend. What will be the intrinsic per share stock price after the dividend and what will be the dividends per share?

Re-Purchase: If they do so by repurchasing stock. What will the intrinsic per share stock price be immediately after the repurchase? How many shares will be remaining?