Flock Inc. is a public-listed film production company. In early 2020, it released the globally successful TV series "Safe Landing on Them" after a few failed productions. Despite the failures, Flock's shares have managed to hold steady, trading between $12 to $15 over the past 12 months. Flock's CEO strongly believes that the share prices are undervalued and in response, Flock's management has provided the following suggestions:

1. Declare dividends on the success of "Safe Landing on Them" as a reward to shareholders for their faith in the company; or

2. Undertake a share repurchase exercise at its current share price of $15.

a) Which, in your opinion, is the best course of action for Flock's shareholders? Justify your answer. Be sure to include relevant examples where appropriate. (7 marks)

b) Based on your understanding of Signaling Theory, what signal(s) will each of the suggestions send to the market? Explain your answer. Be sure to include relevant examples where appropriate.