Answered step by step
Verified Expert Solution
Question
1 Approved Answer
XYZ Technologies has $ 5 0 million in excess cash and no debt. The firm expectsto generate additional free cash flows of $ 4 0
XYZ Technologies has $ million in excess cash and no debt. The firm expectsto generate additional free cash flows of $ million per year in subsequent years and willpay out these future free cash flows as regular dividends. XYZs unlevered cost of capitalis and there are million shares outstanding. XYZs board is meeting to decidewhether to pay out its $ million in excess cash as a special dividend or to use it torepurchase shares of the firm's stock.Assume that you own shares of XYZ stock and that XYZ uses the entire $ millionto repurchase shares. Suppose you are unhappy with XYZs decision and would prefer thatXYZ used the excess cash to pay a special dividend. Please calculate the number of sharesthat you would have to sell in order to receive the same amount of cash as if XYZ paid thespecial dividend.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started