A company has been paying a regular cash dividend of $4 per share each year for over a decade. The company is paying all its earnings as dividends and is not expected to grow. There are 100,000 shares outstanding selling for $80 per share. The company has sufficient cash on hand to pay the next year dividend. Suppose the company decides to cut its cash dividend to zero and announces it will repurchase shares instead

What is the immediate stock price reaction?

How many shares will the company purchase next year instead of paying dividends?

What are the future stock prices for the old and new rules for (year 1, 2 and 3)