You are holding 1,000 shares of stock in Corp. Alpha. Now, the Corp. Alpha will spent $1 million in 1) cash dividend and 2) stock repurchase.

a.) In perfect market without tax and no imperfections, which action do you prefer? Explain. [10 marks]

b.) Suppose the capital gains tax rate is zero, whereas the income tax rate is 35%. Which action do you prefer? Explain. [10 marks]

Use proper source to support your augments (e.g. academia paper). Limit your answer to no more than 500 words. List the references you use at end of the answer.