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What will be the effect on flybye eps and pe ratio

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Question - Flybye Ltd. is evaluating an extra dividend versus a share repurchase. In either case Rs.4,00,000 would be spent by the company. Current earnings are Rs.20 per share, and the stock currently sells for Rs.400 per share. There are 8000 shares outstanding. Ignore taxes and other market imperfections in answering parts (a) and (b).

a. Evaluate the two alternatives in terms of the effect on the price per share of the stock.

b. What will be the effect on Flybye's EPS and PE ratio under the two different scenarios?

c. In the real world, which of these actions would you recommend? Why?

Reference no: EM133176516

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