17. Repurchases and Taxes. Now suppose that instead of paying a dividend Good Values (from the previous problem) plans to repurchase $10,000 worth of stock. (LO5)

a. What will be the stock price before and after the repurchase?

b. Suppose an investor who holds 200 shares sells 20 of her shares back to the firm. If there are no taxes on dividends or capital gains, show that she should be indifferent between the repurchase and the dividend.

c. Show that if dividends are taxed at 30% and capital gains are not taxed, the value of the firm is higher if it pursues the share repurchase instead of the dividend.