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Yes, since it increases EPS.

Yes, since it increases EPS.

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
Problem 1PS
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Intro A company has had net income of $22 million in its most recent year and wants to distribute 40% of its net income to shareholders through either dividends or stock repurchases. The firm currently has 2 million shares outstanding, trading at $60. Part 1 What is EPS after a dividend payment? 0+ decimals Submit Part 2 What is EPS after a stock repurchase? 1+ decimals Submit Part 3 Would shareholders be better off with a stock repurchase compared to a dividend payment (ignore taxes and signalling effects)? Yes, since it increases EPS. O Yes, since the company bought their shares. O No, since the higher EPS comes at a cost. O No, since EPS won't be higher in the future. Submit
Transcribed Image Text:Intro A company has had net income of $22 million in its most recent year and wants to distribute 40% of its net income to shareholders through either dividends or stock repurchases. The firm currently has 2 million shares outstanding, trading at $60. Part 1 What is EPS after a dividend payment? 0+ decimals Submit Part 2 What is EPS after a stock repurchase? 1+ decimals Submit Part 3 Would shareholders be better off with a stock repurchase compared to a dividend payment (ignore taxes and signalling effects)? Yes, since it increases EPS. O Yes, since the company bought their shares. O No, since the higher EPS comes at a cost. O No, since EPS won't be higher in the future. Submit
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