how would the wealth of a shareholder be affected by wcii rsquo s choice of method i 586358

Waynesboro Chemical Industries, Inc. (WCII), has 10 million shares outstanding with a current market value of $20 per share. WCII’s board of directors is considering two ways of distributing WCII’s current $50 million free cash flow to equity. The first method involves paying an irregular or special cash dividend of $50 million/10 million=$5 per share. The second method involves repurchasing $50 million worth of shares. For simplicity, we make the assumptions that dividends are received when the shares go ex dividend and that any quantity of shares can be bought at the market price of $20 per share. We also assume that the taxation and information content of cash dividends and share repurchases, if any, do not differ. How would the wealth of a shareholder be affected by WCII’s choice of method in distributing the $50 million?