It is 1 January 2016, and Boomer Equipment Company (BEC)
currently has assets of $250 million and expects to earn a return of 10% during
2016. There are 20 million BEC shares outstanding. The company has an
opportunity to invest in a positive-NPV (minimal) project that will cost $25
million over the course of 2016, and is trying to determine if it should
finance this investment by retaining profits over the course of the year or by
issuing new shares while paying the profits earned as dividends. Show that the
decision is irrelevant in a world of perfect and frictionless markets.