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Question 2: The Dunn
Corporation is planning to pay dividends of $500,000. There are 250,000 shares
outstanding, and earnings per share are $5. The stock should sell for $50 after
the ex-dividend date. If, instead of paying a dividend, the firm decides to
repurchase stock,
a.What should be the
repurchase price?
b. How many shares should
be repurchased?
c.What if the repurchase
price is set below or above your suggested price in part (a)?
d. If you own 100 shares,
would you prefer that the company pay the dividend or repurchase stock?
