a. Assuming markets are perfect, what is the stock's ex-dividend price? b. Suppose the board decides to repurchase shares on the open market with its excess cash rather than paying a dividend. What is the price per share when the repurchase is completed? c. Which policy, dividend or repurchase, makes shareholders better off?
a. Assuming markets are perfect, what is the stock's ex-dividend price? b. Suppose the board decides to repurchase shares on the open market with its excess cash rather than paying a dividend. What is the price per share when the repurchase is completed? c. Which policy, dividend or repurchase, makes shareholders better off?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Payout irrelevance WeDon'tWork Inc. is a company that provides shared leisure space for young adults. The company has $10 million in excess cash on hand, no debt, and 30 million shares of stock
outstanding worth $20.00 per share. The company plans to distribute its excess cash by paying a $0.33 special dividend.
a. Assuming markets are perfect, what is the stock's ex-dividend price?
b. Suppose the board decides to repurchase shares on the open market with its excess cash rather than paying
c. Which policy, dividend or repurchase, makes shareholders better off?
dividend. What is the price per share when the repurchase is completed?
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