Hors d'Age Cheeseworks has been paying a regular cash dividend of $$4$ per share each year for over a decade. The company is paying out all its earnings as dividends and is not expected to grow. There are $100,000$ shares outstanding selling for $$80$ per share. The company has sufficient cash on hand to pay the next annual dividend.

Suppose that, starting in year $1,$ Hors d'Age decides to cut its cash dividend to zero and announces that it will repurchase shares instead.

a$.$ What is the immediate stock price reaction? Ignore taxes, and assume that the repurchase program conveys no information about operating profitability or business risk.

b$.$ How many shares will Hors d'Age purchase?

c$.$ Project and compare future stock prices for the old and new policies.