What will be the effect on this company eps and pe ratio

Reference no: EM133332123

Question: A company is evaluating an extra dividend versus a share repurchase. In either case, $9,000 would be spent. Current earnings are $1.30 per share, and the stock currently sells for $60 per share. There are 1,000 shares outstanding. Ignore taxes and other imperfections in answering the ?rst two questions.

A. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth.

B. What will be the effect on this company's EPS and PE ratio under the two different scenarios?

C. In a world with taxes, which action (dividend payout or stock repurchase) would you recommend? Why?

Reference no: EM133332123

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