Iron Corporation is evaluating an extra dividend versus a share repurchase. In either case, $18,000 would be spent. Current earnings are $2.00 per share, and the stock currently sells for $50 per share. There are 4,000 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round 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? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price per share Shareholder wealth b. EPS PE ratio Extra dividend Repurchase
Iron Corporation is evaluating an extra dividend versus a share repurchase. In either case, $18,000 would be spent. Current earnings are $2.00 per share, and the stock currently sells for $50 per share. There are 4,000 shares outstanding. Ignore taxes and other imperfections. a. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations and round 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? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. Price per share Shareholder wealth b. EPS PE ratio Extra dividend 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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please help i cant fogure what im doing wrong for the last question
Transcribed Image Text:d. Cvaluate the two alternatives in tens of the election the price per share of the stu
and shareholder wealth per share. (Do not round intermediate calculations and
round 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? (Dc
not round intermediate calculations and round your answers to 2 decimal places
e.g., 32.16.)
Answer is complete but not entirely correct.
Extra
dividend
Repurchase
a.
Price per share
$
45.50
$
50.00
Shareholder
$
50.00
$
wealth
50.00
b.
EPS
$
2.00
$
2.20
PE ratio
25.00 X
22.73
Transcribed Image Text:Iron Corporation is evaluating an extra dividend versus a share repurchase. In either
case, $18,000 would be spent. Current earnings are $2.00 per share, and the stock
currently sells for $50 per share. There are 4,000 shares outstanding. Ignore taxes and
other imperfections.
a. Evaluate the two alternatives in terms of the effect on the price per share of the stock
and shareholder wealth per share. (Do not round intermediate calculations and
round 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? (Do
not round intermediate calculations and round your answers to 2 decimal places,
e.g., 32.16.)
a. Price per share
Shareholder wealth
b. EPS
PE ratio
Extra dividend
Repurchase
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