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Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million...

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Finance

Natsam Corporation has $250 million of excess cash. The firm hasno debt and 500 million shares outstanding, with a current marketprice of $15 per share. Natsam’s board has decided to pay out thiscash as a one-time dividend

. a. What is the ex-dividend price of a share in a perfectcapital market?

b. If the board instead decided to use the cash to do a one-timeshare repurchase, in a perfect capital market what is the price ofthe shares once the repurchase is complete? c. In a perfect capitalmarket, which policy, in part (a) or (b), makes investors in thefirm better off?

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Natsam Corporation has $250 million of excess cash. The firm hasno debt and 500 million shares outstanding, with a current marketprice of $15 per share. Natsam’s board has decided to pay out thiscash as a one-time dividend. a. What is the ex-dividend price of a share in a perfectcapital market?b. If the board instead decided to use the cash to do a one-timeshare repurchase, in a perfect capital market what is the price ofthe shares once the repurchase is complete? c. In a perfect capitalmarket, which policy, in part (a) or (b), makes investors in thefirm better off?

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