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A company is considering distributing its $60 in cash either in the form of a dividend or by buying back its stock. If it distributes
A company is considering distributing its $60 in cash either in the form of a dividend or by buying back its stock. If it distributes the $60 as a dividend, the cash will go to the current shareholders. If the company buys back its stock, it will pay $12/share. Fill in the six blanks in the table below. Base Issue dividends 0 $300 $60 $300 $360 Buyback shares 0 $300 Cash Other assets Total market value of stock Shares Share price 30 $12 In the above example, suppose the firm had paid $20 per share when buying back shares with its $60 in cash, how many shares would remain outstanding and what would be the price of the outstanding shares? Before After buyback buyback $60 o $300 $300 $360 Cash Other assets Total market value of stock Shares Share price 30 $12
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