Robert Henry is on the board of directors of the Hampshire Tour Company, and Hampshire has announced its plan to pay dividends of $400,000. Currently there are 200,000 shares outstanding, and the earnings per share are $5. It seems the stock could sell for $35 after the ex-dividend date. What if, instead of paying a dividend, the management decided to repurchase stocks?

b. Robert wants to look out for the small shareholders. If someone owns 100 shares, do you think he would prefer that the company pay the dividend or repurchase stock?