Payout Corp has regularly paid a quarterly dividend of $ 50 per share on its 20,000 outstanding shares Now suppose that Payout announces that instead of paying this dividend, it plans to repurchase $10,000 worth of stock instead a What effect will the repurchase have on an investor who currently ho...

a After the repurchase the market value of equity falls to 990000 and th ...

Payout Corp. has regularly paid a quarterly dividend of $.50 per share on its 20,000 outstanding shares.

Question:

Payout Corp. has regularly paid a quarterly of $.50 per share on its 20,000 outstanding shares. Now suppose that Payout announces that instead of paying this it plans to repurchase $10,000 worth of stock instead.
a. What effect will the repurchase have on an investor who currently holds 100 shares and sells 1 of those shares back to the company in the repurchase?
b. Compare the effects of the repurchase to the effects of the cash that you worked out in Problem 5.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...