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Accounting

Problem:

Flashback Corporation is evaluating an extra dividend versus a share repurchase. In either case, 16320 would be spent. Current earnings are $3.10 per share, and the stock currently sells for $85 per share. There are 3400 shares outstanding. Ignore taxes and other imperfections in answering the first two questions.

Requirement:

Question 1: Evaluate the two alternatives in terms of effect on price per share of the stock and shareholder wealth.

Question 2: What wil be the effect on Flashback's EPS and PE ratio under two different senario?

Question 3: In the real world, which of these actions would you recomend? Why?

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167261

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