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Alex, Inc. is financed 100% with equity. The firm has 100,000 shares of stock outstanding with a
market price of $5 per share. Total earnings for the most recent year are $50,000. The firm has
cash of $25,000 in excess of what is necessary to fund its positive NPV projects. The firm is
considering using the cash to pay an extra dividend of $25,000 or, alternatively, to repurchase
$25,000 of stock. The firm has other assets worth $475,000 (market value). For each of the
questions that follow, assume there are no transaction costs, taxes, or other market imperfection

Assume the firm pays the $25,000 excess cash in the form of a cash dividend. What will
be the firm\'s P/E ratio once the dividend is paid? (3 marks)
d) After speaking with the board of directors, Alex, Inc. decides to issue a special dividend
with a total of 25,000 on March 29 th , 2023, to all shareholders of record as of March 15 th .
If you purchase the stock on Tuesday March 14th , right after the market opens. How many
dividends will you gain on March 29 th ? Please explain your answer.