Flemington Farms Is Evaluating an Extra Dividend Versus a Share

question 15

Multiple Choice

Flemington Farms is evaluating an extra dividend versus a share repurchase.In either case, $10,000 would be spent.Current earnings are $2.10 per share, and the stock currently sells for $52 per share.There are 2,000 shares outstanding.Ignore taxes and other imperfections.The PE ratio will be ____ if the firm issues the dividend as compared to ____ if the firm does the share repurchase.

• A)22.38; 22.38
• B)24.87; 22.38
• C)20.23; 24.87
• D)22.38; 20.23
• E)20.23; 22.38

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Definitions:

Consumer Development Stage

A phase in the consumer lifecycle where individuals or groups evolve in their purchasing patterns and preferences.

Evaluation Stage

The phase in decision-making where alternatives are assessed against a set of criteria to select the best option.

Percentage of Sales Budgeting

A method of budgeting where advertising and promotional expenses are based on a fixed percentage of the past or projected sales.

Competitive Parity

A marketing strategy where companies set their levels of spending to match competitors, aiming to prevent market share loss.