KMS Corporation has total assets of $340 million and its about to pay its annual dividend. It has total debt of $100 million and 12 million shares outstanding. The company earns $28.8 million net profits in cash every year. KMS has a payout policy to maintain a 100% payout ratio by paying a cash dividend.

(i). Assume perfect capital market (no tax). If KMS distributes $28.8 million as a dividend, what will its share price be after the dividend is paid?

(ii). Assume shareholders of KMS pay a 20% tax on dividends and there is no capital gain tax. KMS makes a surprise announcement that KMS will no longer pay dividends but will use the cash to repurchase stock instead. Assume tax is the only market imperfection. Without calculation, explain how this announcement will influence KMSs share price.