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(Solution Download) Rudolph Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,0


 

 

 

 

 

 

 

Rudolph Corporation is evaluating an extra dividend versus a

 

share repurchase. In either case, $14,000 would be spent. Current

 

earnings are $2.00 per share, and the stock currently sells for $50

 

per share. There are 2,000 shares outstanding. Ignore taxes and

 

other imperfections.

 

 

 

 

 

 

 

 

 

 

a.

 

Evaluate the two alternatives in terms of the effect on the

 

price per share of the stock and shareholder wealth per share.

 

(Round your answers to 2 decimal places. (e.g.,

 

32.16))

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative

 

I

Extra

 

dividend

  Price per share

 

$   

  Shareholder

 

wealth

 

$   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative

 

II

 

Repurchase

  Price per share

 

$   

  Shareholder

 

wealth

 

$   

 

 

 

 

 

 

 

 

 

b.

 

What will Rudolph's EPS and PE ratio be under the two different

 

scenarios? (Do not round intermediate calculations and

 

round your final answers to 2 decimal places. (e.g.,

 

32.16))

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative 1

  EPS

 

$   

  PE ratio

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alternative II

  EPS

 

$   

  PE ratio

 

  

 

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