A company currently operates two projects. Each project is expected to generate a cash inflow of 56 million every year forever. The company has a cost of capital of 10% and 100 million shares on issue. There are no taxes. All assumptions under Miller and Modigliani Dividend Irrelevancy Proposition hold.

a. The company currently pays all its cash flows as a dividend at the end of the year. What will be the shareholders wealth per share at the end of this year including the year-end dividend? (2 marks)

b. Suppose the company wants to increase the current year's dividend by 50.60 per share and is liquidating one of the projects at the end of the year to nance the ligher dividend. Assume there is no cost of fiquidating projects. Demonstrate what impact this would have on shareholder wealth at the end of the year. (2 marks)