Pearson eText Foundations of Finance -- Instant Access (Pearson+)
10th Edition
ISBN: 9780135639382
Author: Arthur Keown, John Martin
Publisher: PEARSON+
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Question
Chapter 13, Problem 15SP
a)
Summary Introduction
To determine: The repurchase price.
b)
Summary Introduction
To determine: The number of shares repurchased.
c)
Summary Introduction
To determine: The impact if repurchase price is set below or above the suggested price..
d)
Summary Introduction
To determine: Whether the firm prefer pay the dividend or repurchase stock.
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Blue Corp. is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would be spent. Current earnings are $1.11 per share and the
stock currently sells for $42 per share. There are 2,500 shares outstanding. Ignore taxes and other imperfections.
If Blue Corp. pays a dividend, what will be the dividend per share? After the dividend is paid, how many shares will be outstanding and what will the price per
share be? Enter your answers rounded to 2 DECIMAL PLACES.
NOTE: Fractional shares are possible (Ex. 0.49 shares)
Dividend 2.2
☑
Correct response: 2.2±0.01
Shares outstanding = 2500
Correct response: 2,500
Stock price = 39.8
Correct response: 39.8±0.01
Click "Verify" to proceed to the next part of the question.
After the $2.2 dividend, the price falls to $39.8 per share. What are earnings per share (EPS) and the price earnings (P/E) ratio? Enter your answers
rounded to 2 DECIMAL PLACES.
EPS =
Number
P/E RatioNumber
Click "Verify" to proceed to the next part of the…
Ford Motor is evaluating an extra dividend
versus a share repurchase. In either case
$20,000 would be spent. Current earnings are
$6.0 per share, and the stock currently sells
for $40 per share. There are 4,000 shares
outstanding. Ignore taxes and other
imperfections in answering parts (a) and (b).
Evaluate the two alternatives in terms of
the effect on the price per share of the stock
and shareholder wealth.
a.
b. What will be the effect on Ford Motor's
EPS and PE ratio under the two different
scenarios?
C. In the real world, which of these actions
would you recommend? Why?
formulation:
DPS= Tol Div (or excess cash) / No. of share
[for unlevered firm] Share price = V/no. of
share
P ex-div = P - DPS
EPS= Earnings (assume a constant) / no. of
share
P.E. = stock price/ EPS
No. of share repurchase = Excess Cash / Stock
Price
Built Rite Corp. is evaluating an extra dividend versus a share repurchase. In either case, $7,500 would be spent. Current earnings are $1.24 per share, and the stock currently sells for $32 per share. There are 5,000 shares outstanding. Ignore taxes and other imperfections. You own one share of stock in this company. If the company issues the dividend, your total investment will be worth ____ as compared to ____ if the company opts for a share repurchase.
Chapter 13 Solutions
Pearson eText Foundations of Finance -- Instant Access (Pearson+)
Ch. 13 - What is meant by the term dividend payout ratio?Ch. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 1SPCh. 13 - (Dividend policy and the issue of new shares of...Ch. 13 - Prob. 3SPCh. 13 - (Dividend policy and stock prices) The issue as to...Ch. 13 - (Residual dividend policy) FarmCo, Inc. follows a...Ch. 13 - (Legal restrictions on dividend payments) Describe...Ch. 13 - (Practical considerations in setting dividend...Ch. 13 - Prob. 8SPCh. 13 - Prob. 9SPCh. 13 - Prob. 10SPCh. 13 - Prob. 11SPCh. 13 - Prob. 12SPCh. 13 - Prob. 13SPCh. 13 - Prob. 14SPCh. 13 - Prob. 15SPCh. 13 - Prob. 16SPCh. 13 - Prob. 1.1MCCh. 13 - The executive vice-president in charge of finance...Ch. 13 - Prob. 2.1MCCh. 13 - Prob. 2.2MCCh. 13 - Prob. 2.3MC
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