A company expects to earn Rs.4.4 million in 2022, and 50% of this amount or Rs.2.2 million has been allocated for distribution to common shareholders. There are 1.1 million shares outstanding and the market price is Rs.20 a share. The company believes it can either use Rs.2.2 million to repurchase 100,000 shares through a tender offer at Rs.22 a share or else pay a cash dividend of Rs.2 a share. How does this affects EPS, P/E and expected market price?
A company expects to earn Rs.4.4 million in 2022, and 50% of this amount or Rs.2.2 million has been allocated for distribution to common shareholders. There are 1.1 million shares outstanding and the market price is Rs.20 a share. The company believes it can either use Rs.2.2 million to repurchase 100,000 shares through a tender offer at Rs.22 a share or else pay a cash dividend of Rs.2 a share. How does this affects EPS, P/E and expected market price?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company expects to earn Rs.4.4 million in 2022, and 50% of this amount or
Rs.2.2 million has been allocated for distribution to common shareholders. There
are 1.1 million shares outstanding and the market price is Rs.20 a share. The
company believes it can either use Rs.2.2 million to repurchase 100,000 shares
through a tender offer at Rs.22 a share or else pay a cash dividend of Rs.2 a share.
How does this affects EPS, P/E and expected market price?
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