4. Amarillo’s Best Company (ABC) has released the following information.earnings available to common stockholders $5,000,000Number of shares of common stock outstanding 1,000,000Market price per share $50Retained earnings 11,600,000(a) What are ABC's current earnings per share?(b) What is ABC's current P/E ratio?(c) ABC wants to use half of its earnings either to pay shareholders dividends or to repurchaseshares for inclusion in the firm's employee stock ownership plan. If the firm pays a cash dividend,what will be the dividend per share received by existing shareholders?(d) Instead of paying the cash dividend, what if the firm uses half of its earnings to pay $55 pershare to repurchase the shares, what will be the firm's new EPS? What should be the firm's newshare price?(e) Compare the impact of a stock dividend and stock repurchase on shareholder wealth
This question was answered on: Sep 21, 2023
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