Safaris Inc. is weighing the option of an extra dividend versus a share repurchase and...
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Accounting
Safaris Inc. is weighing the option of an extra dividend versus a share repurchase and the impact that each decision would have on the firm.
Safaris Inc. intends to send $70 000 with reference to both cases. Their current earnings are $3.20 per share. The current selling price of their stock is $30 per share.
Safaris Inc. currently has 4,500 shares outstanding.
Suppose you own one share of stock in this company.
a) If Safaris Inc. issues the dividend, what will your total investment be worth?
b) If Safaris Inc. pursues a share repurchase what will be your total investment be worth?
Ignore taxes and other imperfections.
Please show all working and formulas used. Explain any necessary steps.
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