The stock of Simon will go ex-dividend tomorrow. The dividend will be $1 per share, and there are 15,000 shares of stock outstanding. The market-value balance sheet for Simon is shown below.

                   

Assets		Liabilities and Equity
Cash	$250,000	Equity	$1,000,000
Fixed assets	750,000

  

So far, price of the share today is $66.67 per share and it will sell at $65.67 per share for tomorrow.

Now suppose that Simon announces its intention to repurchase $15,000 worth of stock instead of paying out the dividend. (Round your answers to the nearest cent.)

               

a.	What effect will the repurchase have on an investor who currently holds 200 shares and sells 3 of those shares back to the company in the repurchase?

    

Total value of the position

$

       

b.	What effect will the initial cash dividend payment have on the same investor?

    

Total value of the position

$

                 

Answer rating: 100% (QA)

a Before the stock repurchase and dividend Total value of 200 shares at 6667 per share 200 ... View the full answer