a) A year ago, your company generated a higher level of cash flows and decided to increase dividend payout. Unfortunately, after a year, the financial results are not as good as expected and the cash flows have bounced back to its pre-adjusted level. Discuss how a decision to cut dividends might impact the companys share price. (2 marks)

b) Alpha Ltd is trading for $31 per share on the day before the ex-dividend date. If the amount of the dividend is $3 and there is no tax, what should the price of the shares be trading for on the ex-dividend date? Explain why (2 marks)

c) You own 1000 shares of Gloria Ltd. The firms management just announce that it will pay $2 dividend per share. Current share price in the market is $40. Assuming that market is perfect, show that you can create your own stream of dividend without changing your total wealth if you want a dividend of $2 per share. (3 marks)