$100,000 in long-term assets, and a valuable investment
June 7th, 2024
$100,000 in long-term assets, and a valuable investment opportunity which promises a NPV equal to $20,000. The company has no debt currently. The company has decided to pay out a cash dividend of $5000 without impacting its investment nor borrowing decisions.a. What happens to the stock price before and after the dividend?b. Would you say that shareholders got worse off as a result? Why or why not.c. What if the company’s new investment project is perceived as having a negative NPV, what would be the stock price before and after the dividend?d. If the company instead repurchases stocks, what is the fair price that the company must pay for each share that it buys back?