age. If she is correct, for s45 afstandin pl has decided to repurchase stock, Qu

Question

age. If she is correct, for s45 afstandin pl has decided to repurchase stock, Question unnced its plan to pay dividends of $550,000. Presently, there are 275,000 2: poration, and Phil- dng, and the earnings per share is $6. It looks like the stock should sell I'm on the board of directors of the B. Phillips Cor lips has announce shares outstandin hr ex-dividend date. If instead of paying a dividend, the management r $45 after the hould be the repurchase price that is equivalent to the proposed divi- dend? (Hint: Ignore any tax effects.) b. How many shares should the company repurchase? e You want to look out for the small shareholders. If someone owns 100 shares think she would prefer that the company pay the dividend or repur- do you chase stock?

Explanation / Answer

Answer 1 total value of company=Price after dividend*share outstanding+ dividend paid Total value of company before dividend=45*275000+550000 Total value of company before dividend= 12925000 Total share o/S 275000 Price before dividend/share repurchase 12925000/275000 Price before dividend/share repurchase 47 Answer 2 shares repurchased=dividend paid/price per share shares repurchased=550000/47 share repurchased= 11702.13 Answer 3 A share repurchase should be viewed as equivalent to the payment of cash dividends of equal amount in terms of the effect on shareholders’ wealth, all other things being equal. In other word whether you pay dividend or repurchase shares price per share will have same effect

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