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QUESTION 7 There are 100,000 shares outstanding. The total market value of the equity is $1 million, so the stock sells for $10 per share. Eamings per share (EPS) are $49,000/100,000 = $.49, and the price-earmings ratio (PE) is $10/$.49 = 20.4. One option the company is considering is a $300,000/100,000 = $3 per share extra cash dividend. Altematively, the company is thinking of using the money to repurchase shares of stock. 01. 10,000 O2.20.000

QUESTION 7 There are 100,000 shares outstanding. The total market value of the equity is $1 million, so the stock sells for $10 per share. Eamings per share (EPS) are $49,000/100,000 = $.49, and the price-earmings ratio (PE) is $10/$.49 = 20.4. One option the company is considering is a $300,000/100,000 = $3 per share extra cash dividend. Altematively, the company is thinking of using the money to repurchase shares of stock. 01. 10,000 O2.20.000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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QUESTION 7 There are 100,000 shares outstanding. The total market value of the equity is $1 million, so the stock sells for $10 per share. Eamings per share (EPS) are $49,000/100,000 = $.49, and the price-eamings ratio (PE) is $10/$.49 = 20.4. One option the company is considering is a $300,000/100,000 = $3 per share extra cash dividend. Altematively, the company is thinking of using the money to repurchase shares of stock O 1.10,000 O2.20.000 0 3.30,000 O 4.300,000
Transcribed Image Text:QUESTION 7 There are 100,000 shares outstanding. The total market value of the equity is $1 million, so the stock sells for $10 per share. Eamings per share (EPS) are $49,000/100,000 = $.49, and the price-eamings ratio (PE) is $10/$.49 = 20.4. One option the company is considering is a $300,000/100,000 = $3 per share extra cash dividend. Altematively, the company is thinking of using the money to repurchase shares of stock O 1.10,000 O2.20.000 0 3.30,000 O 4.300,000
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