Alla Bazzter Excursions Co. holds a total in assets of $840,000 but $168,000 of that isexcess cash. The firm has 80,000 total shares outstanding and expects $2 million in netincome this year. The firm is considering its options with the excess cash, which includesstock buy-back. What will the net effect to the company's earnings-per-share (EPS) if itexecutes the stock buy back?

Step 1: Calculate the current EPS before the stock buyback.Current EPS = Net Income / Total Shares…

Answered: Alla Bazzter Excursions Co. holds a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 12P

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FedEx Corporation (FDX) has a current share price of $157.62 and is expected to have earnings per share (EPS) next year of $11.32 per share. Analysts expect that FedEx's closest competitor, United Parcel Service, Inc. (UPS), will have earnings next year of $8.37 per share. FedEx's cost of capital is 11%. What is your current estimate of the value of one share of UPS stock using the method of comparables? OA. $213.17 OB. $76.09 OC. $13.92 OD. $116.54 OE. $154.67 OF. None of the above is withing $0.35 of the value of one share of UPS stock.
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