5. How Corporations Pay Dividends. The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $.50 per share, and there are 20,000 shares of stock outstanding. The market-value balance sheet for Payout is shown in the following table. (L017-1) Assets Cash Fixed assets $100,000 900,000 Liabilities and Equity Equity $1,000,000 a. What price is Payout stock selling for today? b. What price will it sell for tomorrow? Ignore taxes. c. Suppose that instead of paying a dividend, Payout Corp. announces that it will repurchase stock with a market value of $10,000. What happens to the stock price when the repurchase proposal is announced? d. Suppose that the stock is repurchased immediately after the announcement. What would be the stock price after the repurchase? Stock Repurchases. Payout Corp. from Problem 5 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. (LO17-1) 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 dividend that you worked out in Problem 5. Continue to ignore taxes. Hint: The investor's wealth is composed of the value of the stocks he has (and the cash he receives from stock repurchase or dividend). You may want to compare the investor's wealth before dividend/stock repurchase and after dividend/stock repurchase.