Suppose that all capital gains are taxed at a 30% rate and that the dividend tax rate is 50%. Arbuckle Corporation is currently trading for $45 and is about to pay a $4 special dividend.

a. Absent any other trading frictions or news, what will its share price be just after the dividend is paid? Suppose Arbuckle made a surprise announcement that it would do a share repurchase rather than pay a special dividend.

b. What net tax savings per share for an investor would result from this decision?

c. What would happen to Arbuckle