House of Haddock has 5,000 shares outstanding and the stock

House of Haddock has 5,000 shares outstanding and the stock price is $100. The company is expected to pay a dividend of $20 per share next year, and thereafter the dividend is expected to grow indefinitely by 5% a year. The president, George Mullet, now makes a surprise announcement: He says that the company will henceforth distribute half the cash in the form of dividends and the remainder will be used to repurchase stock. The firm is expected to generate earnings of $100,000 each year. The annual dividend will be paid prior to the annual dividend repurchase.

a. What is the total value of the company before the announcement?

b. What is the total value after the announcement?

c. What is the value of one share before the announcement?

d. What will be the dividend growth rate when the firm switches to the new distribution method?

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...