Suppose B&E Press paid dividends at the end of each year according to the schedule below. It
Question:
a. What is total market value of B&s equity, and what is the total amount paid out to shareholders, at the end of each year?
b. If B&E had made the same total payouts using dividends only (and so kept is share count constant), what dividend would it have paid and what would its ex-dividend share price have been each year?
c. If B&E had made the same total payouts using repurchases only (and so 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 of B&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 originalpolicy?
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