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ABC Corporation is an all-equity firm. The total market value of the firm is $60 million...

ABC Corporation is an all-equity firm. The total market value of the firm is $60 million (which includes $20 million in cash), and there are 1,500,000 shares outstanding. There are no taxes. The firm is considering using $15 million of cash to pay a special one-time dividend or repurchase shares. The company’s current earnings per share are $5.00.

If the firm pays the dividend, what will be the new earnings per share (EPS)?

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Answer #1

If the firm pays the dividend, the new earnings per share will still remain the same which is $5

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