JCI, a manufacturer and distributer of sports equipment, has grown until it has become a stable, mature company. Now JCI is planning its first distribution to shareholders. Shown below are the most recent year's financial statements and projections for the next year (JCI has a fiscal year ending on June 30). JCI plans to liquidate the amount of its short-term securities (shown as distribution) and distribute them on July 1, the first day of the next fiscal year, but has not yet decided whether to distribute with dividends or with stock repurchases.
										Inputs
										Amount of distribution		$500
										Tax rate		35%
	WACC		8.0%
	Number of shares		1,000
	FCF constant growth rate		5.0%
			Actual	Projected
	Income Statement (Millions of Dollars)		6/30/2016	6/30/2017
	Net Sales		$21,000.00	$23,540.00
	Costs (except depreciation)		$16,800.00	$18,450.00
	Depreciation		$1,365.00	$1,400.00
	Earning before int. & tax		$2,835.00	$3,690.00
	Interest expense		$150.00	$150.00
	Earnings before taxes		$2,685.00	$3,540.00
	Taxes		$939.75	$1,239.00
	Net income		$1,745.25	$2,301.00
a. Assume first that JCI distributes the funds as dividends. Fill in the missing values in the balance sheet column for July 1 that is labeled "Distribute as Dividends." (Hint: Be sure that the balance sheets balance after you fill in the missing items. Also, assume JCI did not have to establish an account for dividends payable prior to the distribution.)
										See below for calculations.
									b. Now assume that JCI distributes the funds through stock repurchases. Fill in the missing values in the balance sheet column for July 1 that is labeled "Distribute as Repurchase." (Hint: Be sure that the balance sheets balance after you fill in the missing items.)
				Projected: Prior to Distribution		Distribute as Dividend		Distribute as Repurchase
	Balance Sheets (Millions of Dollars)		Actual
	Assets		6/30/2016	6/30/2017		7/1/2017		7/2/2017
	Cash		$160.00	$175.00		$175.00		$175.00
	Short-term investments		$200.00	$640.00
	Accounts receivable		$2,000.00	$2,250.00		$2,250.00		$2,250.00
	Inventories		$3,000.00	$3,250.00		$3,250.00		$3,250.00
	Total current assets		$5,360.00	$6,315.00		$5,675.00		$5,675.00
	Net plant and equipment		$13,000.00	$13,780.00		$13,780.00		$13,780.00
	Total assets		$18,360.00	$20,095.00		$19,455.00		$19,455.00
	Liabilities & Equity
	Accounts payable		$1,000.00	$1,060.00		$1,060.00		$1,060.00
	Accruals		$2,000.00	$2,250.00		$2,250.00		$2,250.00
	Short-term debt		$400.00	$0.00		$0.00		$0.00
	Total current liabilities		$3,400.00	$3,310.00		$3,310.00		$3,310.00
	Long-term debt		$2,070.00	$2,250.00		$2,250.00		$2,250.00
	Total liabilities		$5,470.00	$5,560.00		$5,560.00		$5,560.00
	Common stock		$5,850.00	$5,850.00		$5,850.00		$5,850.00
	Treasury stock		($400.00)	($400.00)
	Retained earnings		$7,440.00	$9,085.00
	Total common equity		$12,890.00	$14,535.00		$5,850.00		$5,850.00
	Total liabilities & equity		$18,360.00	$20,095.00		$11,410.00		$11,410.00
	Check for balance (should be zero):					NOT BALANCED!		NOT BALANCED!