PLEASE HELP!!! ME WITH THIS PROBLEM. 5 PEOPLE HAS ANSWERED THIS PROBLEM WRONG. I

Question

PLEASE HELP!!! ME WITH THIS PROBLEM. 5 PEOPLE HAS ANSWERED THIS PROBLEM WRONG. I'M REALLY STRUGGLING WITH THIS PROBLEM.

Flychucker Corporation is evaluating an extra dividend versus a share repurchase. In either case, $10,000 would be spent. Current earnings are $1.90 per share, and the stock currently sells for $50 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. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

a.

Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Explanation / Answer

= $ 43.86

Shareholder wealth = (4000*43.86) + 10000

= 175439 +10000

= 185439 $

Share to be re-purchase at current Market Price = 50/Share

Total share to be purchased = 4000

Total value = (50*4000) = 200000

Less : Floatation Expense = 10000

Net Wealth = 1900000

Share outstanding 4000 Current MP 50 Current earnings 1.9 Total earnings 7600 Current P/E Ratio 26.32

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