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a) Lippborg Inc. is making good profits, even though growth is slowing down a bit. So far the company has not paid out cash to

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a) Lippborg Inc. is making good profits, even though growth is slowing down a bit. So far the company has not paid out cash to its shareholders, however the CFO wants to start paying dividend or to start a share repurchase program What is the initial question and what should the CFO consider in order to decide on a possible pay out? Explain briefly. (7 points) b) he company has paid a constant cash dividend of 8$ on an annual basis for the last decade. For the dividend payment it used all its earnings. The business outlook is stable with no growth. Currently there are 300.000 outstanding shares at 60$ per share. The company earned again just about the right amount to pay its dividend. The CFO decides to switch instantly from cash dividends to repurchases for this year (To). Project and compare the stock price for the old and the new policy for next year (Tu). (8 points) Do the necessary calculations and fill the following table: New Policy Shares oustanding Shares Repurchased Old Policy Share Price Share Price To T+

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