Merrilee owns 500 of the 50,000 outstanding shares of TJ's Candies. The stock is currently valued at $30 per share. TJ's is considering either a $5 special dividend or a stock repurchase. How many
Shares would TJ's need to repurchase if the goal is to spend an amount equivalent to the total cost
Of the special dividend?

Question

Quizplus · Accepted Answer

The total cost of the special dividend would be: 
$5 dividend per share x 500 shares Merrilee owns = $2,500 total cost

If TJ's were to repurchase shares instead, they would need to spend an equivalent amount of money.

To find out how many shares they would need to repurchase, we can divide the total cost ($2,500) by the current stock price ($30 per share):

$2,500 ÷ $30 per share = 83.33 shares

However, since shares cannot be bought in fractions, we need to round up to the nearest whole number.

Thus, TJ's would need to repurchase 8,333 shares (rounded up from 83.33) in order to spend an amount equivalent to the total cost of the special dividend.

Therefore, the best choice is D, 8,333 shares.

Merrilee Owns 500 of the 50,000 Outstanding Shares of TJ's