The DOTDOT Company has earnings available for common stockholders of RM4 million

Question

The DOTDOT Company has earnings available for common stockholders of RM4 million and has 320,000 shares of common stock outstanding at RM50 per share. The firm is currently contemplating the payment of RM3.50 per share in cash dividends.

a) Calculate the firm's current earnings per share (EPS) and price/earnings (P/E) ratio.
b) If the firm can repurchase stock at RM54 per share, how many shares can be repurchased in order of making the proposed cash dividend payment?
c) How much will the EPS be after the proposed repurchased? Why?

Explanation / Answer

a.EPS =4 million/320000=RM12.5 P/E ratio=RM50/RM12.5 =4 b. Let the no of share repurchased = x Cash required =(320000-x)*3.50 54x= (320000-x)*3.50 1120000 =50.5x x=22178.22 no of share repurchased =22,178.22 c. EPS =4 million/(320000-22178.22) =RM13.431

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.