AA Inc. is manufacturing various types of classic furniture. Currently, the operating income of the property is about RM 6 million. Meanwhile, the company has earnings available for common stockholders of RM 3 million and has 1,000,000 shares of common stock outstanding at RM 2.00 per share. AA Inc. is currently contemplating the payment of RM 3.50 per share in cash dividend. The company has a tax rate of 24%. i) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio. ii) If the firm can repurchase stock at RM 2.50 per share, how many shares can be purchased under the proposed cash dividend payment? iii) How much will the EPS be after the proposed repurchase?
AA Inc. is manufacturing various types of classic furniture. Currently, the operating income of the property is about RM 6 million. Meanwhile, the company has earnings available for common stockholders of RM 3 million and has 1,000,000 shares of common stock outstanding at RM 2.00 per share. AA Inc. is currently contemplating the payment of RM 3.50 per share in cash dividend. The company has a tax rate of 24%. i) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio. ii) If the firm can repurchase stock at RM 2.50 per share, how many shares can be purchased under the proposed cash dividend payment? iii) How much will the EPS be after the proposed repurchase?
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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AA Inc. is manufacturing various types of classic furniture. Currently, the operating income of the property is about RM 6 million. Meanwhile, the company has earnings available for common stockholders of RM 3 million and has 1,000,000 shares of common stock outstanding at RM 2.00 per share. AA Inc. is currently contemplating the payment of RM 3.50 per share in cash dividend. The company has a tax rate of 24%.
i) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio.
ii) If the firm can repurchase stock at RM 2.50 per share, how many shares can be purchased under the proposed cash dividend payment?
iii) How much will the EPS be after the proposed repurchase?
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