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Natsam Corporation has $253 million of excess cash. The firm has no debt and 527 million shares outstanding with a current market price of $11 per share. Natsam's board has decided to pay out this cash as a one-time dividend. a. What is the ex-dividend price of a share in a perfect capital market? b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? c. In a perfect capital market, which policy in part (a) or (b) makes investors in the firm better off? a. What is the ex-dividend price of a share in a perfect capital market? The ar-cividend price is $ on a per share basis. (Round to the nearest part) b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? The price of the shares once the repurchase is complete is $ per share. (Round to the nearest cent.) c. In a perfect capital market, which palloy in part (a) or (b) makes investors in the firm better off? (Select the best choice below.) A. Investors are better off with policy in part (a). OB. Investors are better off with policy in part (b). OC. Investors are indifferent to either policy. 10. Assuma capital markets are perfect. Kay Industries currently has $125 milion invested in short-term treasury bills paying 8%, and it pays out the interest payments on these securities as a dividend. The board is considering saling the treasury bills and paying out the proceeds as a one-time dividend payment. Assume that Kay must pay a corporate tax rate of 35%, and investors pay no taxes. a. If the board went ahead with this plan, what would happen to the value of Kay's stock upon the announcement of a change in policy? b. What would happen to the value of Kay's stock on the ex-dividend date of the one-time dividend? c. Given these price reactions, wil this decision benet investors? a. If the board went ahead with this plan, what would happen to the value of Kay's stock upon the announcement of a change in policy? (Select the best choice below.) OA. The value of Kay would fall by $125 milion OB. The value of Kay would rise by $125x 35%-$44 milion. Oc. The value of Kay would remain the same. OD. The value of Kay would rise by $120 milion. b. What would happen to the value of Kay's slock on the ex-dividend date of the one-time dividend? (Select the best choice below) OA. The value of Kay would rise by $125 million. OB. The value of Kay would remain the same. OC. The value of Kay would fall by $125 milion D. It's difficult to tell because the price reaction depends on investor preferences c. Given these price reactions, will this decision benerit investors? (Select the best choice below.) OA. It will benefit investors. OB. It's difficult to tell because the price reaction depends on investor preferences. OC. It will neither benefit nor hurt investors. OD. It will hurt investors. Natsam Corporation has $253 million of excess cash. The firm has no debt and 527 million shares outstanding with a current market price of $11 per share. Natsam's board has decided to pay out this cash as a one-time dividend. a. What is the ex-dividend price of a share in a perfect capital market? b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? c. In a perfect capital market, which policy in part (a) or (b) makes investors in the firm better off? a. What is the ex-dividend price of a share in a perfect capital market? The ar-cividend price is $ on a per share basis. (Round to the nearest part) b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market, what is the price of the shares once the repurchase is complete? The price of the shares once the repurchase is complete is $ per share. (Round to the nearest cent.) c. In a perfect capital market, which palloy in part (a) or (b) makes investors in the firm better off? (Select the best choice below.) A. Investors are better off with policy in part (a). OB. Investors are better off with policy in part (b). OC. Investors are indifferent to either policy. 10. Assuma capital markets are perfect. Kay Industries currently has $125 milion invested in short-term treasury bills paying 8%, and it pays out the interest payments on these securities as a dividend. The board is considering saling the treasury bills and paying out the proceeds as a one-time dividend payment. Assume that Kay must pay a corporate tax rate of 35%, and investors pay no taxes. a. If the board went ahead with this plan, what would happen to the value of Kay's stock upon the announcement of a change in policy? b. What would happen to the value of Kay's stock on the ex-dividend date of the one-time dividend? c. Given these price reactions, wil this decision benet investors? a. If the board went ahead with this plan, what would happen to the value of Kay's stock upon the announcement of a change in policy? (Select the best choice below.) OA. The value of Kay would fall by $125 milion OB. The value of Kay would rise by $125x 35%-$44 milion. Oc. The value of Kay would remain the same. OD. The value of Kay would rise by $120 milion. b. What would happen to the value of Kay's slock on the ex-dividend date of the one-time dividend? (Select the best choice below) OA. The value of Kay would rise by $125 million. OB. The value of Kay would remain the same. OC. The value of Kay would fall by $125 milion D. It's difficult to tell because the price reaction depends on investor preferences c. Given these price reactions, will this decision benerit investors? (Select the best choice below.) OA. It will benefit investors. OB. It's difficult to tell because the price reaction depends on investor preferences. OC. It will neither benefit nor hurt investors. OD. It will hurt investors
