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  3. the company has paid a constant cash dividend of 7

The company has paid a constant cash dividend of 7$ on an annual basis for...

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Finance

The company has paid a constant cash dividend of 7$ on an annual basis for the last decade. For the dividend payment it used all its earnings. The business outlook is stable with no growth. Currently there are 250.000 outstanding shares at 50$ per share. The company earned again just about the right amount to pay its dividend. The CFO decides to switch instantly from cash dividends to repurchases for this year (T0). Project and compare the stock price for the old and the new policy for next year (T1). (10 marks)

Do the necessary calculations and fill the following table:

New Policy

Old Policy

Shares oustanding

Shares Repurchased

Share Price

Share Price

T0

T1

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