Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,260 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,260 worth of stock. Ignore taxes. Liabilities and Assets $ 7,200 Fixed assets 29,300 Equity Equity $11,300 25,200 Cash Debt a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $25,500 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $25,500 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $25,500 a year, find the price-earnings ratio if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 2 decimal places.) f. If total earnings of the firm are $25,500 a year, find the price-earnings ratio if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) g. 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 Big Industries' P/E ratio higher if it pays a dividend? a. Stock price b. Stock price $ 19 per share per share c. EPS d. EPS
Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are 1,260 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,260 worth of stock. Ignore taxes. Liabilities and Assets $ 7,200 Fixed assets 29,300 Equity Equity $11,300 25,200 Cash Debt a. What will be the subsequent price per share if the firm pays a dividend? b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.) c. If total earnings of the firm are $25,500 a year, find earnings per share if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 3 decimal places.) d. If total earnings of the firm are $25,500 a year, now find earnings per share if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 3 decimal places.) e. If total earnings of the firm are $25,500 a year, find the price-earnings ratio if the firm pays a dividend. (Do not round intermediate calculations. Round your answer to 2 decimal places.) f. If total earnings of the firm are $25,500 a year, find the price-earnings ratio if the firm repurchases stock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) g. 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 Big Industries' P/E ratio higher if it pays a dividend? a. Stock price b. Stock price $ 19 per share per share c. EPS d. EPS
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Big Industries has the following market-value balance sheet. The stock currently sells for $20 a share, and there are
1,260 shares outstanding. The firm will either pay a $1 per share dividend or repurchase $1,260 worth of stock. Ignore
taxes.
Liabilities and
Assets
Equity
$ 7,200
Fixed assets 29,300
Debt
$11,300
25,200
Cash
Equity
a. What will be the subsequent price per share if the firm pays a dividend?
b. What will be the subsequent price per share if the firm repurchases stock? (Round your answer to the nearest dollar.)
c. If total earnings of the firm are $25,500 a year, find earnings per share if the firm pays a dividend. (Do not round
intermediate calculations. Round your answer to 3 decimal places.)
d. If total earnings of the firm are $25,500 a year, now find earnings per share if the firm repurchases stock. (Do not
round intermediate calculations. Round your answer to 3 decimal places.)
e. If total earnings of the firm are $25,500 a year, find the price-earnings ratio if the firm pays a dividend. (Do not round
intermediate calculations. Round your answer to 2 decimal places.)
f. If total earnings of the firm are $25,500 a year, find the price-earnings ratio if the firm repurchases stock. (Do not round
intermediate calculations. Round your answer to 2 decimal places.)
g. 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 Big Industries' P/E ratio higher if it pays a dividend?
a. Stock price
b. Stock price
c. EPS
d. EPS
e. Price-earnings ratio
f. Price-earnings ratio
Is Big Industries' P/E ratio higher if it
pays a dividend?
19 per share
per share
g.
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