Problem $17-10$

$"omplete$ the steps below using cell references $to$ given data $or$ previous calculations. $In$ some cases, a simple cell reference $is$ all you need. $To$ cop$\frac{y}{p}$aste a formula across a row $or$ down a column, $anabsolute$ cell reference $or$ a mixed cell reference may $be$ preferred. $If$ a specific Excel function $istobe$ used, the directions will specify the use $of$ that function. $Do$ not type $in$ numerical data into a cell $or$ function. Instead, make a reference $to$ the cell $in$ which the data $is$ found. Make your computations only $in$ the blue cells highlighted below. $In$ all cases, unless otherwise directed, use the earliest appearance $of$ the data $in$ your formulas, usually the Given Data section.

Suppose $B$&$E$ Press paid dividends $at$ the end $of$ each year according $to$ the schedule below. $It$ also reduced its share count $by$ repurchasing $5$ million shares $at$ the end $of$ each year $at$ the $ex-$dividend stock prices shown. $(Assume$ perfect capital markets.$)"$

$20092010201120122013$

$Ex-$Dividend Dtock Price $(\frac{\text{\$}}{s}$hare$)$ $$10\mathrm{.}00$ $$12\mathrm{.}00$ $$8\mathrm{.}00$ $$11\mathrm{.}00$ $$15\mathrm{.}00$

Dividend $(\frac{\text{\$}}{s}$hare$)$ $$0\mathrm{.}50$ $$0\mathrm{.}50$ $$0\mathrm{.}50$ $$0\mathrm{.}50$

Shares Outstanding $(millions)10095908580$

$a.$ What $is$ total market value $ofB$&$Es$ equity, and what $is$ the total amount paid out $to$ shareholders, $at$ the end $of$ each year?

$b.IfB$&$E$ had made the same total payouts using dividends only $(andso$ kept $is$ share count constant$),$ what dividend would $it$ have paid and what would its $ex-$dividend share price have been each year?

$c.IfB$&$E$ had made the same total payouts using repurchases only $(andso$ paid $no$ dividends$),$ what share count would $it$ have had and what would its share price have been each year?

$d.$ Consider a shareholder who owns $10$ shares $ofB$&$E$ initially, does not sell any shares, and reinvests all dividends $at$ the $ex-$dividend share price. Would this shareholder have preferred the payout policy $in(b),(c),or$ the original policy?

Shares repurchased $(millions)5$

$a.$ What $is$ total market value $ofB$&$Es$ equity, and what $is$ the total amount paid out $to$ shareholders, $at$ the end $of$ each year?

$20092010201120122013$

Ending equity value $$1,000$ $$1,140$ $$720$ $$935$ $$1,200$

Total dividends $$100\mathrm{.}00$ $$107\mathrm{.}50$ $$85\mathrm{.}00$ $$97\mathrm{.}50$

Total repurchases

Total payout

$b.IfB$&$E$ had made the same total payouts using dividends only $(andso$ kept $is$ share count constant$),$ what dividend would $it$ have paid and what would its $ex-$dividend share price have been each year?

$20092010201120122013$

Shares

Dividend $(\frac{\text{\$}}{s}$hare$)$

Stock price $(ex-$div$)$

$c.IfB$&$E$ had made the same total payouts using repurchases only $(andso$ paid $no$ dividends$),$ what share count would $it$ have had and what would its share price have been each year?

$20092010201120122013$

Beginning shares

Stock price

Shares repurchased

Ending shares

Ending equity value

$d.$ Consider a shareholder who owns $10$ shares $ofB$&$E$ initially, does not sell any shares, and reinvests all dividends $at$ the $ex-$dividend share price. Would this shareholder have preferred the payout policy $in(b),(c),or$ the original policy?