Paradox Corporation is evaluating an extra dividend verses a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections in answering the following questions: Required Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. What will be the effect on Paradox Corporation’s EPS and P/E ratio under the two different scenarios? In the real world, which of these actions would you recommend? Why?
Paradox Corporation is evaluating an extra dividend verses a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections in answering the following questions: Required Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. What will be the effect on Paradox Corporation’s EPS and P/E ratio under the two different scenarios? In the real world, which of these actions would you recommend? Why?
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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Paradox Corporation is evaluating an extra dividend verses a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. Ignore taxes and other imperfections in answering the following questions:
Required
- Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth.
- What will be the effect on Paradox Corporation’s EPS and P/E ratio under the two different scenarios?
- In the real world, which of these actions would you recommend? Why?
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