M&M capital structure theorie
An all-equity firm with 40M shares outstanding has the payout policy of distributing 50% of its net income as dividends to its shareholders every year. The firm’s net income this year is $100M.
(A) What dividend per share would this firm declare this year?
(B) Suppose that the firm’s stock price is $54/share immediately before the ex-dividend date. What then should be the ex-dividend date stock price?