e) How many shares does Nonlinear have to repurchase?

Suppose that dividends are taxed at a rate of 15% and Nonlinear has to pay a transaction cost for their repurchase. The transaction cost is 20% of the repurchase value.

Suppose that Nonlinear decides to pay out its cash purely in form of a dividend.

f) What is stock price after the ex-dividend date?

g) What is the stock price right before the ex-dividend date?

h) How much does the stock price change when the dividends are announced?

i) How much does total shareholder wealth decrease when the dividends are announced?

j) How much money does the state get from the dividend tax?

Suppose Nonlinear decides to pay out its cash purely in form of a repurchase.

k) If Nonlinear has to pay the transaction cost in cash, what is the dollar value of shares it can buy back? Remember that the transaction cost is 20% of the repurchase value.

l1) How many shares does Nonlinear have to buy?

l2) What is the share price after the repurchase?

m) What is the total change (in billions) in shareholder value from the repurchase?

n) How much money does Nonlinear have to pay in transaction fees in total?

WinSome Inc. has two million shares outstanding and its current assets generate earnings of $2M forever, including the current year. The company wants to launch a new product this year, which will cost $1M initially and generate earnings of $0.5M forever. The firm pays out all its cash, except when it needs to use funds for investment. The cost of capital is 15%. WinSome Inc. has two million shares outstanding and its current assets generate earnings of $2M forever, including the current year. The company wants to launch a new product this year, which will cost $1M initially and generate earnings of $0.5M forever. The firm pays out all its cash, except when it needs to use funds for investment. The cost of capital is 15%