Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million...

Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding, with a current market price of $15 per share. Natsam’s board has decided to pay out this cash as a one-time dividend

. a. What is the ex-dividend price of a share in a perfect capital market?

b. If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete? c. In a perfect capital market, which policy, in part (a) or (b), makes investors in the firm better off?

Expert Solution

jeff jeffy answered 1 year ago

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