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The Cartton Corporation has $4 million in eamings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm has $1 million in excess cash. a. Compute the current price of the stock. (Do not round Intermediate calculations and round your answer to 2 decimal places.) Current price b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dividenda per share c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how many shares will be acquired? (Do not round intermediate calculations and round your answer to the nearest whole share.) Number of shares acquired shares

The Cartton Corporation has $4 million in eamings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm has $1 million in excess cash. a. Compute the current price of the stock. (Do not round Intermediate calculations and round your answer to 2 decimal places.) Current price b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.) Dividenda per share c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how many shares will be acquired? (Do not round intermediate calculations and round your answer to the nearest whole share.) Number of shares acquired shares

Essentials Of Investments
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
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The Cartton Corporation has $4 million in eamings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm bax $1 million in excess cash. a. Compute the current price of the stock. (Do not round Intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.) c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how many shares will be acquired? (Do not round intermediate calculations and round your answer to the nearest whole share.) Mumber of shares acquired shares d. What will the new earnings per share be? (Use the rounded number of shares computed in part c but do not round any other intermediate calculations. Round your answer to 2 decimal places.) e-1. If the P/E ratio remains constant, what will the price of the securities be? (Use the rounded answer from part d and round your answer to the nearest whole dollar.) Stock price e-2. By how much, in terms of dollars, did the repurchase increase the stock price? (Use the rounded whole dollar answer from part Sell with ring Bound your norwer the nearest whole dollar)
Transcribed Image Text:The Cartton Corporation has $4 million in eamings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm bax $1 million in excess cash. a. Compute the current price of the stock. (Do not round Intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.) c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how many shares will be acquired? (Do not round intermediate calculations and round your answer to the nearest whole share.) Mumber of shares acquired shares d. What will the new earnings per share be? (Use the rounded number of shares computed in part c but do not round any other intermediate calculations. Round your answer to 2 decimal places.) e-1. If the P/E ratio remains constant, what will the price of the securities be? (Use the rounded answer from part d and round your answer to the nearest whole dollar.) Stock price e-2. By how much, in terms of dollars, did the repurchase increase the stock price? (Use the rounded whole dollar answer from part Sell with ring Bound your norwer the nearest whole dollar)
The Cartton Corporation has $4 million in eamings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm bax $1 million in excess cash. a. Compute the current price of the stock. (Do not round Intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.) c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how many shares will be acquired? (Do not round intermediate calculations and round your answer to the nearest whole share.) Mumber of shares acquired shares d. What will the new earnings per share be? (Use the rounded number of shares computed in part c but do not round any other intermediate calculations. Round your answer to 2 decimal places.) e-1. If the P/E ratio remains constant, what will the price of the securities be? (Use the rounded answer from part d and round your answer to the nearest whole dollar.) Stock price e-2. By how much, in terms of dollars, did the repurchase increase the stock price? (Use the rounded whole dollar answer from part Sell with ring Bound your norwer the nearest whole dollar)
Transcribed Image Text:The Cartton Corporation has $4 million in eamings after taxes and 1 million shares outstanding. The stock trades at a P/E of 10. The firm bax $1 million in excess cash. a. Compute the current price of the stock. (Do not round Intermediate calculations and round your answer to 2 decimal places.) b. If the $1 million is used to pay dividends, how much will dividends per share be? (Do not round intermediate calculations and round your answer to 2 decimal places.) c. If the $1 million is used to repurchase shares in the market at a price of $41 per share, how many shares will be acquired? (Do not round intermediate calculations and round your answer to the nearest whole share.) Mumber of shares acquired shares d. What will the new earnings per share be? (Use the rounded number of shares computed in part c but do not round any other intermediate calculations. Round your answer to 2 decimal places.) e-1. If the P/E ratio remains constant, what will the price of the securities be? (Use the rounded answer from part d and round your answer to the nearest whole dollar.) Stock price e-2. By how much, in terms of dollars, did the repurchase increase the stock price? (Use the rounded whole dollar answer from part Sell with ring Bound your norwer the nearest whole dollar)
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