Your company has $1 million in free cash flows and is trying to determine how to allocate that capital between organic growth, dividends, and share buybacks. It has the opportunity to engage in organic growth, which has an upfront cost of $1 million and an NPV of $2.3 million. It can offer a $1 dividend to each of its 1 million shareholders. Or it could buy back 100,000 shares at $10 each. 

What should your company do?

Answer rating: 100% (QA)

To determine the best allocation of capital between organic growth dividends and share buybacks we n... View the full answer