Achieve a zero payout policy

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Sammy Co. has a current cash flow (at time 0) of $5 m and pays no dividends. The present value of the company's future cash flows is $10 m. The firm is entirely financed with equity and has $500,000 shares outstanding. Assume the dividend tax rate is zero. Suppose the board of directors of Sammy Co. announces its plan to payout 50% of its current cash flow as dividends to its shareholders. How can Marcus Camp, who owns 500 shares of Sammy stock, achieve a zero payout policy on his own?

Reference no: EM133068259

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