Dividends versus repurchase
Not what you're looking for?
Dividends versus Repurchases.
Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,000 shares Outstanding. The firm will either pay a $1 per share dividend or repurchase $1,000 worth of stock. Ignore taxes.
Assets Liabilities and Equity
Cash $ 2,000 Debt $ 10,000
Fixed assets 28,000 Equity 20,000
A What will be the price per share under each alternative (dividend versus repurchase)?
B If total earnings of the firm are $2,000 a year, find earnings per share under each alternative.
C Find the price-earnings ratio under each alternative.
D Adherents of the "dividends-are-good" school sometimes point to the fact that stocks with high dividend payout ratios tend to sell at above-average price-earnings multiples.
Is this evidence convincing? Discuss this argument with regard to your answers to parts (a)-(c).
Purchase this Solution
Solution Summary
The solution calculates the share price, earnings per share, price-earnings ratio for dividends versus share repurchase options.
Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Basic Social Media Concepts
The quiz will test your knowledge on basic social media concepts.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media