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Problem:

Flashback Corporation is evaluating an extra dividend versus a share repurchase. In either case, $32,500 would be spent. Current earnings are $2.90 per share, and the stock currently sells for $81 per share. There are 5,000 shares outstanding. Ignore taxes and other imperfections.

Required:

Question: What will be the effect on Flashback's EPS and PE ratio under the two different scenarios?

Note: Provide support for rationale.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91169902

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