Question #34
Reading: Reading 15 Analysis of Dividends and Share Repurchases
PDF File: Reading 15 Analysis of Dividends and Share Repurchases.pdf
Page: 13
Status: Unattempted
Question
Which of the following statements about differences observed in payout trends in US and Europe is most accurate?
Answer Choices:
A. A lower proportion of US companies pay dividends as compared to their European counterparts
B. A higher proportion of US companies pay dividends as compared to their European counterparts
C. The percentage of companies making stock repurchases has been trending downwards both in the US and Europe
Explanation
A lower proportion of US companies pay dividends as compared to their European
counterparts. The percentage of companies making stock repurchases has been trending
upwards in the US (since 1980s), the UK and continental Europe (since 1990s).
(Module 15.2, LOS 15.h)
EPS after buyback =
=
=
=
= $3.33
total earnings - after-tax cost of funds
shares outstanding after buyback
$101,898,000 - (600,000 shares x $50 x 0.067)
(30,600,000 - 600,000) shares
$101,898,000 - $2,010,000
30,000,000 shares
$99,888,000
30,000,000 shares