Question
The following data apply to Elizabeth's Electrical Equipment: Value of operations $25,000 Short-term investments: Cash $3,000 Debt $4,000 Number of shares 600 Net Income $5,000
The following data apply to Elizabeth's Electrical Equipment:
| Value of operations | $25,000 |
| Short-term investments: Cash | $3,000 |
| Debt | $4,000 |
| Number of shares | 600 |
| Net Income | $5,000 |
| Current Share Price | $55.00 |
The company plans on distributing the $3,000 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?
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Weathering The Storm A Quick Guide To Safeguarding Your Finances During Economic Recession
Authors: Liam Wilhelm
1st Edition
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