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Part $1$

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Corporation has

$$$$47\mathrm{.}0447\mathrm{.}04$

million in$$ cash,

$9\mathrm{.}89\mathrm{.}8$

million shares$$ outstanding, and a current share price of

$$$$29\mathrm{.}7029\mathrm{.}70.$

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is deciding whether to use the

$$$$47\mathrm{.}0447\mathrm{.}04$

million to pay an immediate special dividend of

$$$$4\mathrm{.}804\mathrm{.}80$

per$$ share, or to retain and invest it at the$$ risk$-$free rate of

$10\%10\%$

and use the

$$$$4\mathrm{.}704\mathrm{.}70$

million in interest earned to increase its regular annual dividend of

$$$$0\mathrm{.}480\mathrm{.}48$

per share. Assume perfect capital markets.

a$.$ Suppose

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pays the special dividend. How can a shareholder who would prefer an increase in the regular dividend create it on her$$ own?

b$.$ Suppose

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increases its regular dividend. How can a shareholder who would prefer the special dividend create it on her$$ own?