AA Inc. is manufacturing various types of classic furniture. Currently, the operating income of the property is about RM 6 million. Meanwhile, the company has earnings available for common stockholders of RM 3 million and has 1,000,000 shares of common stock outstanding at RM 2.00 per share. AA Inc. is currently contemplating the payment of RM 3.50 per share in cash dividend. The company has a tax rate of 24%. i) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio. ii) If the firm can repurchase stock at RM 2.50 per share, how many shares can be purchased under the proposed cash dividend payment? iii) How much will the EPS be after the proposed repurchase?
AA Inc. is manufacturing various types of classic furniture. Currently, the operating income of the property is about RM 6 million. Meanwhile, the company has earnings available for common stockholders of RM 3 million and has 1,000,000 shares of common stock outstanding at RM 2.00 per share. AA Inc. is currently contemplating the payment of RM 3.50 per share in cash dividend. The company has a tax rate of 24%. i) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio. ii) If the firm can repurchase stock at RM 2.50 per share, how many shares can be purchased under the proposed cash dividend payment? iii) How much will the EPS be after the proposed repurchase?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 13P
Related questions
Question
AA Inc. is manufacturing various types of classic furniture. Currently, the operating income of the property is about RM 6 million. Meanwhile, the company has earnings available for common stockholders of RM 3 million and has 1,000,000 shares of common stock outstanding at RM 2.00 per share. AA Inc. is currently contemplating the payment of RM 3.50 per share in cash dividend. The company has a tax rate of 24%.
i) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio.
ii) If the firm can repurchase stock at RM 2.50 per share, how many shares can be purchased under the proposed cash dividend payment?
iii) How much will the EPS be after the proposed repurchase?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning