In your role as a consultant at a wealth management firm, you have been assigned a very powerful client who holds $1$ million shares of Verizon Communications $($VZ$)$ purchased on February $28,2007.$ In researching Verizon, you discovered that they are holding a large amount of cash. Additionally, your client is upset that Verizon stock price has been somewhat stagnant as of late. The client is considering approaching the Board of Directors with a plan for half of the cash the firm has accumulated, but cant decide whether a share repurchase or a special dividend would be best. You have been asked to determine which initiative would generate the greatest amount of money after taxes, assuming that with a share repurchase your client would keep the same proportion of ownership. Because both dividends and capital gains are taxed at the same rate $(20\%),$ your client has assumed that there is no difference between the repurchase and the dividend. To confirm, you need to run the numbers for each scenario.

$1.$Compute the total cash that would be received by your client under the repurchase and the dividend both before taxes and after taxes.

$2.$ Under which program would your client be better off before taxes? Which program is better after taxes, assuming the remaining shares are sold immediately after the dividend is paid?

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