Palm Tree Corporations value of operations is estimated to be $650 million. Palm Tree has $100 million in debt (it has no preferred stock) and 10 million shares of common stock outstanding. Suppose Palm Tree has decided to distribute to its shareholders $65 million, which it is presently holding in T-bills

a Assume that Palm Tree has not yet made the distribution. What is Palm Trees intrinsic value of equity? What is its intrinsic stock price per share?

b Now, suppose that Palm Tree has just made the $65 million distribution in the form of dividends. What is Palm Trees intrinsic stock price per share right after this dividend payment?

c Suppose instead that Palm Tree has just made the $65 million distribution in the form of a stock repurchase. How many shares did Palm Tree repurchase? What is its intrinsic stock price per share right after the repurchase?

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