Problem:
The corporation is evaluating an extra dividend vs. a share repurchase. In either case, $13,000 would be spent. Current earnings are $2.60 per share and the stock currently sells for $60 per share. There are 800 shares outstanding. Ignore taxes and other imperfections.
I need help with determining the effect on the price per share of the stock and shareholder wealth? What will be the effect on the corporations EPS and PE ratio under the 2 different scenarios?
What actions would you recommend in a real world situation?