Kelso's Is Considering Spending $80,000 on Either a Stock Repurchase

question 21

Multiple Choice

Kelso's is considering spending $80,000 on either a stock repurchase or an extra cash dividend. Which one of the following values will be the same whether the firm pays a dividend or repurchases stock? Assume there are no taxes or market imperfections.

• A) Number of shares outstanding
• B) Price per share
• C) Earnings per share
• D) Price-earnings ratio
• E) Market value of equity per share

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Definitions:

Contract

An agreement that is enforceable by law and involves two or more parties, making it legally binding.

Contractual Condition

A specific requirement outlined in a contract that must be met for the contract to be fully enforceable.

Satisfaction

The fulfillment or discharge of a debt, obligation, or penalty.

Performance

The execution, completion, or fulfillment of a duty, contract, or other obligation according to its terms.