Xtel Inc. with a total market value of $630 million has $30 million in excess cash and no debt. Xtel has 1 million shares outstanding. Xtelʹs board is meeng to decide whether to pay out its $30...

Xtel Inc. with a total market value of $630 million has $30 million in excess cash and no debt. Xtel has 1 million shares outstanding. Xtelʹs board is meeng to decide whether to pay out its $30 million in excess cash as a special dividend or to use it to repurchase shares of the firm’s stock. You own 1,000 shares of Xtel stock.

1. Assume that Xtel uses the entire $30 million in excess cash to pay a special dividend.

Calculate Xtelʹs ex-dividend price. Briefly explain your workings.

2.

Assume that Xtel uses the entire $30 million to repurchase shares at a current share

price. How many shares will Xtel repurchase? Briefly explain your workings.