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Rational Demiconductor has the following market-value balance sheet: Rational Demiconductor Balance Sheet (Market Values, in $ millions) Surplus cash $ 8 $ 0.0 Debt Fixed

Rational Demiconductor has the following market-value balance sheet:

Rational Demiconductor

Balance Sheet

(Market Values, in $ millions)

Surplus cash $ 8 $ 0.0 Debt
Fixed assets and net working capital 17 25 Equity market capitalization (1 million shares at $25 per share)
$ 25 $ 25

Assume that Rational wins a lawsuit and is paid $2 million in cash. Its market capitalization rises by that amount. It decides to pay out $10 per share instead of $1 per share. a. What happens to Rationals stock price if the payout comes as a cash dividend?

b. What happens to Rationals stock price if the payout comes as a share repurchase? (Round your intermediate calculations to the nearest whole number.)

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