Suppose that equity repurchases have a transaction cost which equals 25% of the repurchase value, and that the dividend tax rate is 50%. ALLC Corp. is currently trading for $30, has 10M shares outstanding, and a cash reserve of $80M. Suppose that LLC decides to pay out all the cash as a special dividend.

a) What is the value of LLCs equity (in millions)?

b) What is the dividend/share ratio?

c) What is dividend tax paid by investors per share?

d)( What is the share price after the dividend is paid?

e) If you cannot find an answer to the question above, you may assume P_ex=$27. What is the share price after the dividend is announced?

Suppose LLC decides use all its cash for a share repurchase.

f) What is the price at which shares are repurchased?

g) How many shares (in millions) does LLC have to repurchase?

h) How much (in millions) does the firm spend on transaction costs in total? If you did not answer the previous questions, you can assume P_r=$28 and R=1M.