1. A) In perfect market without tax, Rebacca has 100 shares, how much is her cash flow now? (suppose the firms payout ratio is 100%)

b) Suppose the company decides to borrow 200 million long-term debt and use the proceedings to buyback shares. How much is Rebaccas cash flow after the capital restructuring? (10 points)

c) Why do more and more companies prefer stock repurchase to cash dividend?

Bigquiz Corporation (in millions) 2018 2019 sales 800 cost of goods sold 600 depreciation 60 interest rate 10.0% payout 40.0% tax rate 35.0% account receivable 30 cash 20 inventory 24 40 net fixed asset 330 360 account payable 0 0 note payable 0 0 long-term debt 0 0 common stock 100 100 retained earning 300 shares outstanding 10 26