Transcribed Image Text
MNO Corp. has a market capitalization of $13,500,000 and has500,000 shares outstanding. MNO currently pays a $2 per-sharedividend. Bob currently owns 100 shares of MNO. Answer thefollowing questions. Assume no taxes.a. What is the value of Bobâs investment after the dividend ispaid (ie cash from the dividend plus share value)? Keep in mind theshare price change after the dividend is paid.b. Bob would prefer to receive a $1 per-share dividend. Show howBob could achieve an equivalent cash flow while still invested inMNO. Also show that Bobâs investment in MNO has the same value asin part (a).c. Bob would prefer to receive a $3 per-share dividend. If it ispossible, show how Bob could achieve an equivalent cash flow whilestill invested in MNO. Also show that Bobâs investment in MNO hasthe same value as in part (a).d. Now assume Bob pays a 15% tax on dividends. Repeat (a), (b),and (c). Are the results different? Explain.e. What are two other âreal-worldâ factors that were ignored ina), b), and c) that would alter the results? Explain.