Final answer:
If Blue Corp. pays a dividend, the dividend per share would be $3. After the dividend is paid, the number of shares outstanding would remain the same at 1,500, but the price per share would be negative.
Step-by-step explanation:
Blue Corp. is evaluating an extra dividend versus a share repurchase. In either case, $4,500 would be spent. Current earnings are $0.81 per share and the stock currently sells for $38 per share. There are 1,500 shares outstanding. If Blue Corp. pays a dividend, the dividend per share would be calculated as follows:
Dividend per share = Total dividend / Number of shares
Dividend per share = $4,500 / 1,500
Dividend per share = $3
After the dividend is paid, the number of shares outstanding would remain the same at 1,500, but the price per share would be adjusted based on the decrease in retained earnings. The new price per share can be calculated as:
New price per share = (Earnings - Dividend) / Number of shares
New price per share = ($0.81 - $3) / 1,500
New price per share = -$2.19 / 1,500
New price per share = -$0.00146
Therefore, the price per share after the dividend is paid would be negative, which is not possible. It is important to note that this calculation assumes all other factors remain constant and ignores taxes and other imperfections, as mentioned in the question.