Stock repurchase the following financial data on the Bond Recording Company are available: The firm is currently considering whether it should use $550,000 of its earnings to help pay cash dividends of $1.22 per share or to repurchase stock at 523 por share
a. Approximately how many shares of stock can the firm repurchase at the $23-per-share price, using the funds that would have gone to pay the cash dividend?
b. Calculate the EPS after the repurchase.
c. If the stock stil sells at 11 times earnings, what will the market price be after the repurchase?
d. Compare the pre- and post-repurchase earnings per share. e. Compare and contrast the stockholders’ positions under the dividend and repurchase alternatives. What are the tax implications under each alternative?
a. The number of shares Bond can repurchase is . (Round down to the nearest whole number)
b. The EPS after the repurchase is $ . (Round to the nearest cent.)
c. the stock still sells at 11 times earnings, the market price after the repurchases (Round to the nearescent.) the firm’s earnings per share. (Select from the drop-down
d. Compare the pre- and post-repurchase earnings per share. The stock repurchase menu.) e. Which of the following statements is false? (Select the best answer below.)
O A. The post-repurchase price is higher because there are fewer shares outstanding
OB. The post-repurchase price is higher than the pre-repurchase price by the amount of the cath dividend.
OC. Cash dividends are taxable to the stockholder. If the firm repurchases stock, taxes on the increased value of the stock are deferred until the stock is sold
OD. Most stockholders would prefer a cash dividend due to the lower tax rate on dividend income than on capital gain from repurchase. Get Finance homework help today
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