edErna Corporation is evaluating an extra dividend versus a share repurchase. In eithercase, $53,500 would be spent. Current earnings are $1.79 per share, and the stockcurrently sells for $64 per share. There are 9,000 shares outstanding. Ignore taxes andother imperfections.a. Evaluate the two alternatives in terms of the effect on the price per share of the stockand shareholder wealth per share. (Do not round intermediate calculations andround your answers to 2 decimal places, e.g., 32.16.)b. What will the company's EPS and PE ratio be under the two different scenarios? (Donot round intermediate calculations and round your answers to 2 decimal places,e.g., 32.16.)

b. Calculating the EPS (earnings per share) and PE (price-to-earnings) ratio is essential for…

Answered: ed Erna Corporation is evaluating an…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 11P: The Rivoli Company has no debt outstanding, and its financial position is given by the following...

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