Natsam Corporation has $277 milion of excess cash The 8irm has no debt and 476 m

Question

Natsam Corporation has $277 milion of excess cash The 8irm has no debt and 476 million shares outstanding with a cument market price of $14 per share. Suppose the boand decided to do a one-Sme shae epurchase, but you, as an investor, would have prelerred to receive a dividend payment How can you leave yoursell in the same poon as if the board had elacted to make the dvidend payment instead? Which of the follewing is true regarding the effect of a one-time share repurchase on the stlock price in a porlect maket? (Select the best choice below) O B. An open market share epurchase as no effect on he stock price, but the stock price is not the same as the oum-dvidend price ta dvidand were paid insead O D. An open market share repurchase has no effect on the slock prioe To leave yourself in the same postion as if the board had elected to make the dvidend payment inslead you can sell a percentage of your shaes

Explanation / Answer

a. The open market share repurchase decreases the share price because the assets decline by purchasing the shares

Dividend payoff = 277/ 476 = $0.58 per share

Percentage to be sold to leave one in the same position = 0.58/ 14 * 100 = 4.14%

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