24 Jul HOW CAN A SHAREHOLDER WHO WOULD PREFER THE SPECIAL DIVIDEND CREATE IT ON HER OWN?
Clovix Corporation has $50 million in cash 10 Show more The below must be calculated and presented in excel. Clovix Corporation has $50 million in cash 10 million shares outstanding and a current share price of $30. Clovix is deciding whether to use the $50 million to pay an immediate special dividend of $5 per share or to retain and invest it at the risk-free rate of 10% and use the $5 million in interest earned to increase its regular annual dividend of $0.50 per share. Assume perfect capital markets. a. Suppose Clovix pays the special dividend. How can a shareholder who would prefer an increase in the regular dividend create it on her own? b. Suppose Clovix increases its regular dividend. How can a shareholder who would prefer the special dividend create it on her own? Show less
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