a) Dixes's board is meeting to decide how to pay out $30 million in excess cash to shareholders. The company is 100% equity financed with 10 million shares outstanding and their equity cost of capital equals unlevered cost of capital of 12%. Divoc expects to generate future free cash flows of $45 million per year. Demonstrate to the board that their choice of payout policy does not matter under perfect capital markets. Alterative payout policies the board has under consideration are: o Pay $30 million out as cash dividend o Use $30 million to do a Share repurchase o High dividend (equity issue) i.e. the company wants to pay $45 million dividend today but only has $30 million cash available for distribution Demonstrate that, in perfect capital markets, the method of cash distribution by filling out the following table. Show all workings and calculations for each payout policy. RASES Dividend Paid ($ per share) Initial Share Price Year 0 Year 1 Year 2 Policy 1: Policy 2: Policy 3: a) Dixes's board is meeting to decide how to pay out $30 million in excess cash to shareholders. The company is 100% equity financed with 10 million shares outstanding and their equity cost of capital equals unlevered cost of capital of 12%. Divoc expects to generate future free cash flows of $45 million per year. Demonstrate to the board that their choice of payout policy does not matter under perfect capital markets. Alterative payout policies the board has under consideration are: o Pay $30 million out as cash dividend o Use $30 million to do a Share repurchase o High dividend (equity issue) i.e. the company wants to pay $45 million dividend today but only has $30 million cash available for distribution Demonstrate that, in perfect capital markets, the method of cash distribution by filling out the following table. Show all workings and calculations for each payout policy. RASES Dividend Paid ($ per share) Initial Share Price Year 0 Year 1 Year 2 Policy 1: Policy 2: Policy 3