Tangshan Mining Company has released the following information. (a) What are Tangshan Mining's current earnings per share?
(b) What is Tangshan Mining's current P/E ratio?
(c) Tangshan Mining wants to use half of its earnings either to pay shareholders dividends or to repurchase shares 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 per share to repurchase the shares, what will be the firm's new EPS? What should be the firm's new share price?
(e) Compare the impact of a stock dividend and stock repurchase on shareholder wealth.

Question

Tangshan Mining Company has released the following information.  (a) What are Tangshan Mining's current earnings per share?
(b) What is Tangshan Mining's current P/E ratio?
(c) Tangshan Mining wants to use half of its earnings either to pay shareholders dividends or to repurchase shares 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 per share to repurchase the shares, what will be the firm's new EPS? What should be the firm's new share price?
(e) Compare the impact of a stock dividend and stock repurchase on shareholder wealth.

Quizplus · Accepted Answer

The Answer of Tangshan Mining Company has released the following information.  (a) What are Tangshan Mining's current earnings per share?
(b) What is Tangshan Mining's current P/E ratio?
(c) Tangshan Mining wants to use half of its earnings either to pay shareholders dividends or to repurchase shares 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 per share to repurchase the shares, what will be the firm's new EPS? What should be the firm's new share price?
(e) Compare the impact of a stock dividend and stock repurchase on shareholder wealth.

Tangshan Mining Company Has Released the Following Information