market$-$value balance sheet:

Share price is $$11,$ so market capitalization is $$11$ million $(1$ million shares $x$$$11)$

Rational Demiconductor Balance Sheet $($$ millions$)$

If the firm decides to pay out all its surplus cash, the market capitalization of the company

must fall down to $$10$ million.

Example: Dividends or Repurchase?

If the firm decides to pay out all its surplus cash, the market capitalization of the company must

fall down to $$10$ million.

Effect per share does depend on how the cash is paid out!

If the firm pays a dividend of $$1$ per share, $1$ million shares will still be outstanding

This will mean that share price will fall to $$10$ per share.

Shareholder's wealth, including cash dividends, would be $$10+$$$1=$$$11$