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

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Accounting

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. now suppose that payout announces its intention to repurchase $10000 worth of stock instead of paying out the dividend.

a. What effect will the repurchase have on investor who currently holds 100 shares and sells 1 of those shares back to the company in the repurchase?

b. Compare the effects of the repurchase to the effects of the cash dividend that you worked out in problem 5.

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