The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $.50 per share, and

Question:

The stock of Payout Corp. will go ex-dividend tomorrow. The dividend will be $.50 per share, and there are 20,000 shares of stock outstanding. The market-value balance sheet for Payout is shown in the following table.

a. What price is Payout stock selling for today?
b. What price will it sell for tomorrow? Ignore taxes.
c. Suppose that instead of paying a dividend, Payout Corp. announces that it will repurchase stock with a market value of $10,000. What happens to the stock price when the repurchase proposal is announced?
d. Suppose that the stock is repurchased immediately after the announcement. What would be the stock price after the repurchase?

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...