CHAPTER 14
ELECTRONIC TIMING, INC.
1. The value of the company will decline by the amount of the dividend. Ignoring taxes, shareholders
wealth will not be affected because the stock price will drop by the amount of the dividend payment.
3. He is incorrect. The EPS will increase as well as the stock price, but the PE ratio will remain constant.
The ROA and ROE will also be the same under a repurchase or dividend.
4. A regular dividend payment is something the company should probably not undertake. A company
rarely begins regular dividend payments that it will be unable to continue in the future. Cessation of
dividend payments is viewed a negative signal by the market.