DividendAll Corp. has the following market value balance sheet; Cash 25,000,000 Debt 40,000,000 Assets 115,000,000 Equity 100,000,000 Total Assets 140,000,000 Total Liability and Equity 140,000,000 Is has 2 million outstanding shares. Jack Doe owns 200 shares of DividendAll Corp. Assume no taxes. Show the impact (1) on the balance sheet and (2) Jack Doe portfolio (cash level, number of share, shares value) of the following (four events): a. An $10 million dividend. b. An $10 million share buyback. c. A 10% stock split. d. A five for one (=one to five) stock split. e. Assume the original balance sheet. How can Jack Doe create his $500 homemade dividend? f. Assuming no transaction cost determine Jack Doe preferences between (a) and (b): 1. Dividends are taxed as regular income, while capital gains are taxed at 15% only. 2. Dividends and capital gains are taxed at the same 15% reduced tax rate.

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