Question

#Question/ Average Team Bhd has the following market-value balance sheet. The stock currently sells for $30.00 a share and there are 1 million shares outstanding. The firm will either pay a $2.50 share dividend or repurchase a $2.5 million worth of stock. ignore taxes.

Assets	Liabilities and Equity
Cash / $11,000,000	Debt / $20,000,000
Fixed Assets / $39,000,000	Equity / $30,000,000

1- Compute the subsequent price per share, if the firm pays a dividend.

2- Compute the subsequent price per share, if the firm repurchases stock.

3- If the net income of the firm is $2 million a year, find the firms' earning per share if the firm pays a dividend.

4- Compute the earning per share if the firm repurchases stock.

5-Find the price-earnings ratio if the firm pays a dividend.

6-Compute the price-earnings ratio if the firm repurchases stock.

Answer 1