IntroA company has had net income of $22 million in its mostrecent year and wants to distribute 40% of its netincome to shareholders through either dividends orstock repurchases. The firm currently has 2 millionshares outstanding, trading at $60.Part 1What is EPS after a dividend payment?0+ decimalsSubmitPart 2What is EPS after a stock repurchase?1+ decimalsSubmitPart 3Would shareholders be better off with a stockrepurchase compared to a dividend payment (ignoretaxes 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

Earning per share refers to the amount of money that a company makes for the payment of each share…

Answered: Yes, since it increases EPS.

Business

Finance

Yes, since it increases EPS.

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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Question

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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