Firm A wants to return $10 million in cash to shareholders….
Firm A wants to return $10 million in cash to shareholders. Advisor Jack wants Firm A to pay out $10 million of cash as a dividend now. Advisor Jane wants Firm A to spend $10 million repurchasing the firm’s stock at currently fair prices now. If the firm chooses Jane’s course of action a) The repurchase choice will be preferred to the dividend choice by investors who are in high tax brackets and want to minimize taxes paid b) The firm’s stock price should usually be higher with the repurchase rather than the dividend choice after the cash is paid out c) With the repurchase choice instead of the dividend choice, the firm’s expected EPS (earnings per share) in the year ahead should be higher if the firm is expected to report positive net income d) all the above e) a) and b) f) b) and c) g) none of the above