Natsam Corporation has $250 million of excess cash. The firm has no debt and 600 million shares outstanding with a current market price of $17 per share. Natsam's board has decided to pay out this cash as a one-time dividend. What is the ex-dividend price of a share in a perfect capital market? (Round to the nearestcent.) If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete? (Round to the nearestcent.) In a perfect capital market, which policy, in part (a) or (b), makes investors in the firm better off? (Round to the nearestcent.)
Natsam Corporation has $250 million of excess cash. The firm has no debt and 600 million shares outstanding with a current market price of $17 per share. Natsam's board has decided to pay out this cash as a one-time dividend. What is the ex-dividend price of a share in a perfect capital market? (Round to the nearestcent.) If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete? (Round to the nearestcent.) In a perfect capital market, which policy, in part (a) or (b), makes investors in the firm better off? (Round to the nearestcent.)
Chapter14: Distributions To Shareholders: Dividends And Repurchases
Section: Chapter Questions
Problem 12P
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Natsam Corporation has $250 million of excess cash. The firm has no debt and 600 million shares outstanding with a current market price of $17 per share. Natsam's board has decided to pay out this cash as a one-time dividend.
- What is the ex-dividend price of a share in a perfect capital market? (Round to the nearestcent.)
- If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete? (Round to the nearestcent.)
- In a perfect capital market, which policy, in part (a) or (b), makes investors in the firm better off? (Round to the nearestcent.)
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