Question
Yellow Corp. is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would...
Yellow Corp. is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would be spent. Current earnings are $1.16 per share and the stock currently sells for $45 per share. There are 2,300 shares outstanding. Ignore taxes and other imperfections.
NOTE: Fractional shares are possible (Ex. 0.54 shares)
Dividend = 2.39
Shares outstanding = 2300
Stock price = 42.61
After the $2.39 dividend, the price falls to $42.61 per share.
EPS=1.16
P/E Ratio =36.73
If Yellow Corp. goes with the share repurchase, how many shares will they buy? After the repurchase, how many shares will be outstanding and what will the price per share be? Enter your answers rounded to 2 DECIMAL PLACES.
Shares repurchased =
Shares outstanding =
Stock price =
Answers
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
C w ENG 02:19 01-08-2020 66 34 Х CW695 . CO CP CQ CR CS СТ CU CV CW CX CY CZ [ 1 CURRENT SHARE PRICE = 45 CASE 1 EXTRA DIVIDEND DIVIDEND PER SHARE = 5500/2300 = 2.39 673 674 675 676 677 678 679 680 681 682 683 684 AFTER DIVIDEND PAYMENT SHARE PRICE WILL BE = 45-2.39 = 42.61 1.16 EPS = (EPS WILL NOT CHANGE AS NO OF SHARES ARE SAME) 685 P/E = MARKET PRICE /EPS = 42.61/1.16 = 36.73 CASE 2 REPURCHASE 122.22 NO OF SHARES REPURCHASED = SHARES LEFT AFTER REPURCHASE = 5500/45 = 2300 - 122.22= 2177.78 686 687 688 689 690 691 692 693 694 695 696 45 REPURCHASE DOES NOT AFFECT THE SHARE PRICE AS THERE ARE NO TAXES HIGH LOW TARGET PRICE STOCK DIV NAV HEDGE FUND ME EV PE EPS DIV ABNORMAL deberk MARGIN MONEY marginal tax PB PS ROPI AF ... +
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