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Rational Demiconductor has the following market-value balance sheet: Rational Demiconductor Balance Sheet (Market Values, $ millions) Surplus cash $ 2 $ 0 Debt Fixed assets

Rational Demiconductor has the following market-value balance sheet:

Rational Demiconductor

Balance Sheet

(Market Values, $ millions)

Surplus cash $ 2 $ 0 Debt
Fixed assets and net working capital 11 13 Equity market capitalization (1 million shares at $13 per share)
$ 13 $ 13

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 $4 per share instead of $1 per share.

a. What happens to Rationals stock price if the payout comes as a cash dividend? (Round your answer to the nearest whole number.)

New stock price $

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

New stock price $

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