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Question 17:
How would you expect the (tax adjusted) weighted average cost of capital to change if the cash is paid out as an exceptional dividend? Please discuss. Does it make a difl'erence if there
is still debt on the balance sheet? You can again make the assumption that there is no
taxation. Question 1 8:
What is in your opinion the best payout strategy: Should ST Microelectronics maintain a high level of cash on its balance sheet or should they give this cash to shareholders? Please answer
this question by first explaining the consequence of a cash payout on shareholder wealth in
the perfect Modigliani Miller world without taxation and then giving two reasons for why reality is more complex.

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