A corporation purchases 1,000 shares of their outstanding common stock. What effect will the sharebuyback have on the earnings per share of the corporation?Earnings per share will increase because there will be less shares outstandingO Earnings per share will decrease because there will be less shares outstandingO Earnings per share will decrease because there will be more shares outstandingO Earnings per share will increase because there will be more shares outstanding

Treasury stock is that stock or shares which are being repurchased or reacquired by the business…

Answered: A corporation purchases 1,000 shares of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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4. Target Inc. has just paid a dividend of $4 per share and has announced that it will increase the dividend by $2 per share for each of the next four years, and then never pay another dividend. If you require an 8% return on the company’s stock, how much will you pay for a share today? (show work)
A firm has 7,000 outstanding shares with current value of 10£ per share. Planned dividend is £5 per share. What is the ex-dividend share price? How much is the share price if the company decides to use the cash it had originally earmarked for dividend for a share repurchase instead? A. £5, £10 B. £10, £5 C. £8, £10 D. £2, £12 ( explain well with step by step answer ).
Which would increase a firm's return on equity? A. Issuance of 12% bonds and investing the proceeds to earn more than 12%. B. Increasing the size of cash dividends to shareholders. C. Increase in the firm's price earnings ratio D. Increase in market price of the firm's ordinary share E. none of the above
Cliff Corp (CC) has assets of $300 million including $25 million in cash. CC has 1 million share of stock outstanding and $70 million of debt. Assume capital markets are perfect. What is CC’s current debt-to-equity ratio? What is CC’s current stock price? If CC distributes $18 million in dividends, then what is the new ex- dividend share price? If instead of paying the dividend CC repurchases $18 million of stock, then what will be the new share price? What is the new debt-to-equity ratio after the payout?
Let us suppose, a company has 1 million outstanding shares of stock, each valued at 25$. Let us also suppose that the replacement cost of its physical capital stock is 18 million $. a. Should this firm invest in more physical capital?b. Would your answer in part (a) change, if the replacement cost of its physical capital stock changes to 28 million $?
In the above example, suppose the firm had paid $80 per share when buying back shares with its $100 in cash. (Assume that the firm can buy back fractional shares.) In this and the following two questions, fill in the blanks in the table below. Cash Other assets Total market value of stock Shares Share price Do not use $ sign. Answer to nearest whole number. The missing value for a is: Before buyback $100 $400 $500 10 $50 After buyback 0 $400 a b C
REH Corporation's most recent dividend was $2.82 per share, its expected annual rate of dividend growth is 5%, and the required return is now 15%. A variety of proposals are being considered by management to redirect the firm's activities. Determine the impact on share price for each of the following proposed actions. a. Do nothing, which will leave the key financial variables unchanged. b. Invest in a new machine that will increase the dividend growth rate to 8% and lower the required return to 13%. c. Eliminate an unprofitable product line, which will increase the dividend growth rate to 9% and raise the required return to 17%. d. Merge with another firm, which will reduce the growth rate to 2% and raise the required return to 18%. e. Acquire a subsidiary operation from another manufacturer. The acquisition should increase the dividend growth rate to 9% and increase the required return to 17%.
1. Discuss the implication of share Buybacks and Stock Options on the value of a company? 2. Discuss what recommendations you would have for a company like Bed, Bath, & Beyond, who spent 100's of millions of dollars on Share buybacks, which resulted them going bankrupt.
6 Please show work in Excel format, thanks!

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