Built Rite Corp.is evaluating an extra dividend versus a share repurchase.In either case,$5,500 would be spent.Current earnings are $0.80 per share,and the stock currently sells for $33 per share.There are 250 shares outstanding.Ignore taxes and other imperfections.You own one share of stock in this company.If the company issues the dividend,your total investment will be worth ____ as compared to ____ if the company opts for a share repurchase.
A)$11; $11
B)$11; $22
C)$11; $33
D)$23; $33
E)$33; $33

Question

Quizplus · Accepted Answer

Dividend per share = $5,500/250 = $22Ex-dividend stock price = $33 - $22 = $11Shareholder value with dividend option = $22 + $11 = $33Shares repurchased = $5,500/$33 = 166.6667Shareholder value with repurchase = $33Shareholder value if shares held = $33