Consider Genron Corporation. The firms board is meeting to decide how to pay put $20 million in excess cash to shareholders. Genron has no debt, and its equity cost of capital equals its unlevered cost of capital of 12%. Genron has 10 million shares outstanding, and expects to generate future free cash flow of $48 million per year starting from next year. Assume the capital market is perfect.
Suppose to pay the same amount of dividend in every year, Genron raises 28 million cash by selling new shares. Calculate the cum-dividend price and ex-dividend price of Genron.