The Following Data Apply to Grullon-Ikenberry Inc

question 58

Multiple Choice

The following data apply to Grullon-Ikenberry Inc.:​Net income (NI) expected for the coming year$625,000Currently outstanding shares100,000Current stock price$40.00​​The company is in a mature industry.Therefore,it plans to distribute all of its income at year-end,and its earnings are not expected to grow.The CFO is now deciding whether to distribute income to stockholders as dividends or to use the funds to repurchase common stock.She believes the P/E ratio will not be affected by a repurchase.Moreover,she believes that the stock can be repurchased at the end of the year at the then-current price,which is expected to be the now-current price plus the dividend that would otherwise be received at year-end.Disregarding any possible tax effects,how much would a stockholder who owns 100 shares gain if the firm used its net income to repurchase stock rather than for dividends?

• A)$564.06
• B)$593.75
• C)$625.00
• D)$656.25

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Definitions:

Hawthorne Studies

A series of productivity experiments conducted from 1924-1932, which found that worker productivity increased under varying levels of light due to the psychological stimulus of being studied.

HR Training

The process by which employees are educated and developed to enhance their job skills and organizational knowledge.

Line Managers

Are those directly responsible for creating goods and services.

General Managers

Managers responsible for overseeing the day-to-day operations of a business or a specific department within an organization.