Now suppose Natsam Corporation has ($275) million of excess cash. The firm has no debt and 500
Question:
Now suppose Natsam Corporation has \($275\) million of excess cash. The firm has no debt and 500 million shares outstanding with a current market price of \($19\) per share. The board decided to do the share repurchase in Problem 7, part b, but you, as an investor, would have preferred to receive a dividend payment. How can you leave yourself in the same position as if the board had elected to make the dividend payment instead?
Data from in problem 7
Natsam Corporation has \($250\) million of excess cash. The firm has no debt and 350 million shares outstanding, with a current market price of \($20\) per share. Natsam’s board has decided to pay out this cash as a one-time dividend.
b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete?
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