Question 2 Payout Policy (8 marks) NHK Ltd plans to distribute all of its earnings (100% payout ratio) in the previous year through cash dividends or share repurchases. This payment will not influence the profitability (i.e. ROE) of the firm. Assume a perfect capital market (i.e., no tax, no transaction cost, symmetric information, etc.) and share price is determined by the constant growth model. Indicate how cash dividend and share repurchase may influence (Increase, Decrease, Unchanged) the values in the following table (the change in the value immediately after the payment is made). Cash dividend Share repurchase Share price Number of shares Earnings per share (EPS) Price/EPS (P/E)