The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $0.50 per share, and

Question:

The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $0.50 per share, and there are 20,000 shares of stock outstanding. The market-value balance sheet for Payout is shown below Suppose that Payout announces its intention to repurchase $10,000 worth of stock instead of paying out the dividend.

a. What effect will the repurchase have on an investor who currently holds 100 shares and sells 1 of those shares back to the company in the repurchase?

b. Compare the effects of the repurchase to the effects of the cash dividend.

The stock of Payout Corp. will go ex-dividend tomorrow. The

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...