Please answer blank parts(#2 and #4) but please dont copy answers of others cos
ID: 2613050 • Letter: P
Question
Please answer blank parts(#2 and #4) but please dont copy answers of others cos they were icorrect
Rudolph Corporation is evaluating an extra dividend versus a share repurchase. In either case. $11,000 would be spent. Current earnings are $1.90 per share, and the stock currently sells for $55 per share. There are 4.000 shares outstanding. Ignore taxes and other imperfections. Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Round your answers to 2 decimal places, (e.g., 32.16)) What will Rudolph's EPS and PE ratio be under the two different scenarios? (Do not round intermediate calculations and round your final answers to 2 decimal places, (e.g., 32.16))Explanation / Answer
Answer: As requested
Alternative 1:
No of shares after payment of dividend = 4,000 (Same as earlier)
Shareholder' wealth = No of shares* Market price per share = 4,000*$52.25 = $209,000
Alternative - 2:
No of share's repurchased = $11,000/$55 = 200 nos
No of shares after share repurchase = 4,000 - 200 = 3,800 nos
Shareholder' wealth = No of shares* Market price per share = 3,800*$55 = $209,000