Exercise 1. (7 points) Please read the following article (The Wall Street Journal, March 2012) Apple Pads Investor Wallets; In Major Shift, New CEO Announces Dividend, Share Buyback Apple bowed to mounting pressure to return some of its roughly $96.7 billion in cash reserves to shareholders by saying it would issue a dividend and buy back stock. The last time Apple paid a dividend was in December 1995. [Former CEO Steve] Jobs largely resisted returning cash to shareholders. He felt the company could use the money to expand the business by more than the bump to per-share earnings a buyback would provide. But following Mr. Cook's appointment as CEO, Apple's approach changed. The company announced it would pay a $2.65 a share quarterly dividend. Apple's board also authorized a $10 billion share repurchase program. Over the past decade, other tech behemoths such as Microsoft Corp., Oracle Corp. and Cisco Systems Inc. had also begun payouts to shareholders as the companies matured. But unlike those companies-which were experiencing slower growth rates and whose initiation of a dividend was regarded as a sign that some of their fastest growth was behind themApple is still expanding rapidly. In its last reported quarter, Apple more than doubled its quarterly profits (to $38.6 billion). [After the news] Apple's share price rose 2.7% to $601.10, pushing Apple's market capitalization to an all-time high of $560.45 billion. Please answer the following questions (max 5 lines each): a. Please compute Apple's payout ratio and Apple's dividend yield after the announcement of the new payout policy. Assuming that Apple makes the repurchase at the current market price, how many shares would it buy back? b. Using the result from a., estimate how much the earnings per share (EPS) of Apple will change after the buyback is made (ignore the dividend in this question). Please make any assumptions that might think necessary, explaining your choices.