Just Right Incorporated is considering the option of an extra dividend versus a share repurchase and the impact of both decisions on the firm. Just Right plans to spend $85,000 in respect of both scenarios. Just Rights current earnings are $2.10 per share, and the stock currently sells for $45 per share. Just Right currently has 5,000 shares outstanding.

You own one share of stock in this company.

If the company issues the dividend, what will your total investment be worth? If the company pursues a share repurchase what will be your total investment be worth?

Kindly Ignore taxes and other imperfections. Show all workings. (9 marks)

b) (i) The equity of John Blunt limited have a total market value of $86,000. Currently, Blunt limited has excess cash of $6,000 and a net income of $67,000. There are 1,500 shares of stock outstanding. What will be the percentage change in the stock price per share if the firm pays out all of its excess cash as a cash dividend? (5 marks)

(ii) Explain how cash dividends affect individual shareholders differently than an equal amount of funds spent on a repurchase. (16 marks)