**Please answer with full steps, thank you so much! A firm is debating whether or not...

**Please answer with full steps, thank you so much!

A firm is debating whether or not to conduct a share repurchase or pay a special dividend with $2,000,000 cash.

Current EPS is $3.00 per share, and the 500,000 shares outstanding currently sell for $40 each.

You own exactly 1,000 shares.

a) If the firm makes the special dividend payment, what will your total wealth be?

b) If the firm repurchases shares, how many shares will be repurchased, and what will your total wealth be?

c) If the firm makes the special dividend payment, what will the P/E ratio be?

d) If the firm repurchases shares, what will the new EPS be?

e) If the firm repurchases shares, what will the new P/E ratio be?

f) From your perspective as an investor, would your prefer a special dividend or a share repurchase? Why?

Expert Solution

jeff jeffy answered 2 years ago

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