The stock of Lamatar Company will go ex-dividend tomorrow. The current market-value based balance sheet of the company is follows:
Assets		Liabilities & Equity
Cash	$ 410,000	Equity	$ 1,200,000
Fixed Assets	$ 790,000
	$ 1,200,000		$ 1,200,000
Other information:
Number of outstanding shares:		24000
Cash dividend (per share):		$5.00
Answer the following questions:
i. What price is Lamatar stock selling for today? [2 marks]
ii. What price will it sell for tomorrow? Ignore taxes. [2 marks]
Now suppose that Lamatar announces its intention to repurchase 10% worth of stock instead of paying out cash divided.
iii. Prepare the pro-forma balance sheet (as shown above) after the stock repurchase? [3 marks]
iv. What price will it sell for tomorrow (after stock repurchase)? [2 marks]
Now suppose that Lamatar again changes its mind and decides to issue a 10% stock dividend instead of either cash dividend or share repurchse plan.
v. Prepare the pro-forma balance sheet (as shown above) after the stock dividend payment? [3 marks]
vi. What will be the price per share after the stock dividend? [2 marks]
vii. If you currently own 10% shares of Lamatar Company, what will be the changes in the value of your investment in Lamatar stocks? [3 marks]
viii. Based on your answers to (i) to (vii) above, compare the effect of different divided payout policies on stock price, market value of the firm, the shareholder's wealth. [3 marks]