Striker$$s Match Company reports the following financial data:

Net earnings $$3,600,000$

Shares outstanding $1,200,000$

Earnings per share $$3$

Market price per share $($ex$-$dividend$)$ $$40$

Expected dividend per share $$1$

Striker is considering distributing $$2$ million to existing stockholders, either as cash dividends or through the repurchase of outstanding shares. The repurchase plan is favored by some of the company$$s wealthiest and most influential stockholders.

If the shares are repurchased, the company would make a tender offer for $45,454$ shares at a price of $$44.$ Alternatively, the firm could pay a $$3$ dividend, after the payment of which each share would sell for $$40.$

Ignoring taxes, what impact does the choice of a dividend payment or share repurchase plan have on the wealth position of the firm$$s shareholders?

Impact of a dividend payment: the wealth position of the stockholders

a$.$ remains unchanged

b$.$ increases

c$.$ declines

Impact of share repurchase plan: the wealth position of the stockholders

a$.$ remains unchanged

b$.$ increases

c$.$ declines

If most shareholders are in a very high marginal tax bracket, which alternative is favored?

a$.$ The share repurchase or b$.$ The dividend payment will be preferred by high$-$tax bracket stockholders.

What are the limitations on the repurchase alternative as an element of the firm$$s dividend policy?

The regular repurchase of stock may result in taxes

a$.$ being paid immediately

b$.$ being postponed