Calciya, Co. has a policy of returning at least 40 percent of earnings to shareholders every year through dividend issues and open-market stock repurchases. In each quarter this year, the company earned $0.20 per share. In each of the first three quarters, the company paid a regular cash dividend of $0.05 per share. The company has 8 million shares of common stock outstanding. What combination of dividends and stock repurchases could the company's board approve to meet their target payout percentage?

Question

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- For each quarter, the company earned $0.20 per share, which adds up to $1.60 for the entire year.
- 40% of $1.60 is $0.64 per share, which is the target payout per share for the year.
- A regular cash dividend of $0.05 per share for each quarter adds up to $0.20 for the year. To reach the target payout, the company needs to distribute $0.44 per share ($0.64 - $0.20) for the year through either stock repurchases or extra dividends.
- An open-market stock repurchase of $960,000 would allow the company to buy back 120,000 shares ($960,000 / $8 per share), which is 1.5% of the outstanding shares (120,000 / 8,000,000). This reduces the number of shares outstanding, leading to an increase in earnings per share and potentially increasing the stock price.
- An extra dividend of $0.12 per share would also help the company reach the target payout. However, this would require the company to have enough cash on hand to distribute the extra dividend in addition to the regular cash dividend and stock repurchase. 
- Therefore, the best option to meet the target payout percentage would be to do both - a regular cash dividend of $0.05 per share and an open-market stock repurchase of $960,000 in stock AND a regular cash dividend of $0.05 per share and an extra dividend of $0.12.