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Cisco Systems has at this moment 10 million shares outstanding and the following market-value balance sheet:

Balance Sheet (Market Values, $ Million) Surplus cash50.0

Debt0

Net Working Capital & Assets500.0

Equity550.0

 $550.0

 $550.0


Assuming that neither the firm nor its investors pay taxes, answer the following questions:

I) What is Cisco's current share price?

II) If Cisco now sells a patent that it previously thought was worthless and is paid $20 million in cash, and its (market value) surplus cash rises to $70.0 million, what is Cisco's new share price?

III) If Cisco decides to pay out all its surplus cash ($70.0 million) as a cash dividend, what is Cisco's ex-dividend share price?

IV) If the firm pays out all its surplus cash ($70.0 million) through an offer to repurchase shares at the fair market value per share, what is Cisco's post-offer share price?

a.I) $50; II) $52; III) $50; IV) $50

b.I) $55; II) $55; III) $48; IV) $55

c.I) $55; II) $57; III) $50; IV) $57

d.I) $57; II) $52; III) $50; IV) $52

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