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34kurt
3 years ago
11

Hodgkiss corporation is evaluating an extra dividend versus a share repurchase. in either case, $27,000 would be spent. current

earnings are $2.70 per share, and the stock currently sells for $96 per share. there are 4,500 shares outstanding. ignore taxes and other imperfections. what will the company's eps and pe ratio be under the two different scenarios? (do not round intermediate calculations and round your answers to 2 decimal places,
e.g., 32.16.) extra dividend share repurchase eps $ 6 $ pe ratio
Business
1 answer:
inn [45]3 years ago
8 0

If extra dividend is given,

Dividend per share = Net income / Number of shares outstanding

Dividend per share = $ 27,000 / 4,500 shares

Dividend per share = $ 6 per share

Now. the price will reduce by $ 6 per share

Earnings per share will be $ 2.70 per share.

Price earnings ratio = New price / Earnings per share

Price earnings ratio = $ 96 - $ 6 / $ 2.70 = 33.33

If the shares were purchased from $ 27,000 -

Number of shares purchased = $ 27,000 / $ 96 = 281.25 or 281 shares

Total earnings = $ 2.70 X 4,500 shares = $ 12,150

New EPS = $ 12,150 / (4500 shares - 281 shares) = $ 2.88 per share

New Price earnings ratio = Price / Earnings per share

New Price earnings ratio = $ 96 / $ 2.88 = 33.33

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Answer:

90%

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So the correct answer is 90%

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3 years ago
Roomz, a mid-range hotel, used to provide only food and accommodation facilities. It soon realized that most of its customers ar
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Answer:

This is an example of an emergent strategy

Explanation:

An emergent strategy is an unplanned strategy it is the strategy that actually happens as a result of changes in the external environment of the  business and it shows the responds to  such changes. Although it is unintended, adopting an emergent strategy  helps a business adapt more flexibly to the practicalities of changing market conditions.  

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3 years ago
Sixty-second Avenue Inc. expects to earn $5,700,000 this year. The company currently has 790,000 shares outstanding, and the sha
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Answer:

The company's expected market price per share After the repurchase would $23.68

Explanation:

In order to calculate the company's expected market price per share After the repurchase we would have to calculate first the Price-to-earnings ratio ( P/E ratio ) as follows:

Price-to-earnings ratio ( P/E ratio )= Market price per share / Earnings per share

Earnings per share = Earnings/ number of shares outstanding =$ 5,700,000 / $790,000 = $ 7.21

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Therefore, the company's expected market price per share After the repurchase=$ 8.14 x 2.91 = $23.68

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3 years ago
1. An 80%-owned subsidiary sells merchandise to its parent at a markup of 25% on cost. During the current year, the parent paid
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The unrealised profit (PURP) of $5,000 [ (125,000 * .20) * (.2) ]  should be subtracted from the profit share of Non-Controlling Interest.

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