Basel Corporation has 2,500,000 in earnings after taxes and 1,000,000 shares outstanding. The stock has...
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Basel Corporation has 2,500,000 in earnings after taxes and 1,000,000 shares outstanding. The stock has par value of 3 and currently sells for 27 per share. The firm has 2,000,000 in excess cash. The firm is considering to use this money either to pay cash dividends or to arrange a share repurchase. Instructions: 1. For each scenario, determine the subsequent price per share, earnings per share, and price-earnings ratio. (10 points) 2. If the company declares a five-for-four stock split, how the equity accounts will change? How many shares will be outstanding? What will be the new par value per share? (10 points) 3. If the company declares a stock dividend, how the equity accounts will change? Explain the procedure. (10 points)
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