A corporation purchases 1,000 shares of their outstanding common stock. What effect will the sharebuyback have on the earnings per share of the corporation?Earnings per share will increase because there will be less shares outstandingO Earnings per share will decrease because there will be less shares outstandingO Earnings per share will decrease because there will be more shares outstandingO Earnings per share will increase because there will be more shares outstanding

Treasury stock is that stock or shares which are being repurchased or reacquired by the business…

Answered: A corporation purchases 1,000 shares of…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 12MCQ

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1. 2. 3. On February 1, you bought 100 shares of stock in the Francesca Corporation for $34 a share and a year later you sold it for $39 a share. During the year, you received a cash dividend of $1.50 a share. Compute your HPR and HPY on this Francesca stock investment. Firms raise capital from investors by issuing shares in the primary markets. Does this imply corporate financial managers can ignore trading of previously issued shares in the secondary market? 7. A stockbroker calls you and suggests that you invest in the Lauren Computer Company. After analyzing the firm's annual report and other material, you believe that the distribu- tion of expected rates of return is as follows: LAUREN COMPUTER CO. Possible Rate of Return -0.60 -0.30 -0.10 0.20 0.40 0.80 Probability 0.05 0.20 0.10 0.30 0.20 0.15 Compute the expected return [E(R;)] on Lauren Computer stock.
Ford Motor is evaluating an extra dividend versus a share repurchase. In either case $20,000 would be spent. Current earnings are $6.0 per share, and the stock currently sells for $40 per share. There are 4,000 shares outstanding. Ignore taxes and other imperfections in answering parts (a) and (b). Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth. a. b. What will be the effect on Ford Motor's EPS and PE ratio under the two different scenarios? C. In the real world, which of these actions would you recommend? Why? formulation: DPS= Tol Div (or excess cash) / No. of share [for unlevered firm] Share price = V/no. of share P ex-div = P - DPS EPS= Earnings (assume a constant) / no. of share P.E. = stock price/ EPS No. of share repurchase = Excess Cash / Stock Price
Your corporation is evaluating declaring a cash dividend or declaring a share repurchase. In either case your corporation only has $10,000 to spend. Your corporation has 700 shares of stock outstanding that is currently selling for $55.00 per share. Please show your calculations in the space provided.What would be the amount of cash dividend per share if your corporation declares a cash dividend?
#2: XYZ Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. b) What will the company's EPS and P/E ratio be under the two different scenarios?
Blue Corp. is evaluating an extra dividend versus a share repurchase. In either case, $5,500 would be spent. Current earnings are $1.11 per share and the stock currently sells for $42 per share. There are 2,500 shares outstanding. Ignore taxes and other imperfections. If Blue Corp. pays a dividend, what will be the dividend per share? After the dividend is paid, how many shares will be outstanding and what will the price per share be? Enter your answers rounded to 2 DECIMAL PLACES. NOTE: Fractional shares are possible (Ex. 0.49 shares) Dividend 2.2 ☑ Correct response: 2.2±0.01 Shares outstanding = 2500 Correct response: 2,500 Stock price = 39.8 Correct response: 39.8±0.01 Click "Verify" to proceed to the next part of the question. After the $2.2 dividend, the price falls to $39.8 per share. What are earnings per share (EPS) and the price earnings (P/E) ratio? Enter your answers rounded to 2 DECIMAL PLACES. EPS = Number P/E RatioNumber Click "Verify" to proceed to the next part of the…
c. If Tp = 15 percent and TG = 30 percent, how much will the share price fall? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Share price d. Suppose the only owners of stock are corporations. Recall that Corporations get at least a 50 percent exemption from taxation on the dividend income they receive, but they do not get such an exemption on capital gains. If the corporation's income and capital gains tax rates are both 21 percent, what does this model predict the ex- dividend share price will be? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Share price D N. Elton and M. Gruber, "Marginal Stockholder Tax Rates and the Clientele Effect," Review of Economics and Statistics 52 (February 1970).
In total how much did it cost the company to buy back its own shares of stock how much did the company pay per share for its treasury stock? If the company had a2:1 stock split on its common stock how many more shares is common stock would be issued?
Assume that you are a shareholder in On-the-Move Corporation. The company has just changed its debt-equity ratio from 0.29 to 0.38. If you prefer the old capital structure, you should: Multiple Choice O sell some shares and loan out the sale proceeds. do nothing. borrow funds and purchase more shares. sell some shares and hold the sale proceeds in cash. sell all of their shares and loan out the entire sale proceeds.
Select the statement that is TRUE. A. A preference shareholder will be paid the same rate of dividend each year B. Holding preference shares in a business is more risky than holding ordinary shares C. Preference shareholders can vote at annual general meetings (AGM). D. Preference shares are worth more than ordinary shares
Shell Inc. is having a stock split. The current price is $57 per share, and you own 500 shares. The split is a one-and-one-half-shares-for-one share split. What is the expected per share price after the split? What is your wealth before and after the split? Based on empirical evidence, does the market value of outstanding shares (new price times new quantity) tend to increase or decrease on average when stocks split into a greater number (but lower priced) shares, as in this case
The book value per share is usually a close approximation of the market price per share. is the same as the par value per share. may be useful in determining the trend of a shareholders’ per share equity in a corporation. always falls within the annual range of a company's market value per share.
1. Northstar Corporation is considering to pay $10,000 the shareholders. There are 1,000 shares outstanding and the current share price is $50, the current earnings are $20 per share. a. What is the ex-dividend price of Northstar' stock? b. How can Bob, who owns 50 shares of Northstar, achieve a zero payout policy on his own? c. How do the stock price and shares outstanding change if the company spend $10,000 to repurchase stocks rather than paying cash dividends? d. How the EPS and PE ratio change after the dividend payment and share repurchase, respectively? e. If the payout ratio remain consistent, the adjustment rate is 0.3 defined in the Lintner model, and this company expects to have an earnings per share of 25 for next year, what is the dividend one year from now?

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