Galles Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would be spent. Current earnings are $1.60 per share, and the stock currently sells for $56 per share. There are 3,500 shares outstanding. Ignore taxes and other imperfections.
a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)
Alternative I
Extra dividend Price per share $ 52
Shareholder wealth $ 56
Alternative II Repurchase
Price per share $
Shareholder wealth $
b. What will the company's EPS and P/E ratio be under the two different scenarios? (Do not round intermediate calculations. Round your final answers to 2 decimal places, e.g., 32.16.) Alternative 1
EPS $
P/E ratio
Alternative II
EPS $
P/E ratio
Galles Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,000 would be spent. Current earnings are $1.60 per share, and the stock currently sells for $56 per share. There are 3,500 shares outstanding. Ignore taxes and other imperfections.
a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)
Alternative I
Extra dividend Price per share $ 52
Shareholder wealth $ 56
Alternative II Repurchase
Price per share $
Shareholder wealth $
b. What will the company's EPS and P/E ratio be under the two different scenarios? (Do not round intermediate calculations. Round your final answers to 2 decimal places, e.g., 32.16.) Alternative 1
EPS $
P/E ratio
Alternative II
EPS $
P/E ratio
Related questions
| Flashback Corporation is evaluating an extra dividend versus a share repurchase. In either case, $28,060 would be spent. Current earnings are $2.60 per share, and the stock currently sells for $97 per share. There are 4,600 shares outstanding. Ignore taxes and other imperfections. |
| Requirement 1: | |
| What will Flashbackâs EPS and PE ratio be under the two different scenarios? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
| Extra Dividend | Share Repurchase | |
| EPS | $ | $ |
| PE Ratio | ||
| Requirement 2: | |
| In the real world, which of these actions would you recommend? | |
| (Click to select)Extra dividend or Share repurchase |
