To Identify:
Difference in cash flows under two initiatives when return is 20% and 10%.
Dividend:
It is the part of the profit of the firm which a firm can distribute to its shareholders. Out of total profit, firm distributes a part and retains a proportion to reinvest in future.
(a)
To Identify:
Stock price after 5 year or 10 years if dividend is paid now.
(b)
To Identify:
Stock price after 5year or 10 years if company C repurchases shares now.
(c)
To Identify:
After tax cash flows and difference between cash flows at both points in time that is 5year or 10 years, when the dividend payment or share repurchase take place and the remaining shares are sold.
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Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
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