Extra Cash and Share Repurchase

1 By using the extra cash for a special one-time dividend, the company's value will decrease since this dividend would have been used for reinvestment (and even expansion and development). Accordingly, the stock price may be affected since the declaration of the division also affects the company's book value. This may result in the reduction of the economic value of the company. Nonetheless, this does not mean that special dividends must not be distributed. Dividends are still essential for the long-term retention and satisfaction of the investors, which means that it is also beneficial provided that special care is taken thereof. 
2 Jessica's proposal is highly beneficial to the company. On the one hand, the extra cash used for the upgrade would further increase the company's manufacturing capabilities. This will increase its earnings capacity, which is one of the determinants used for its valuation. On the other hand, the repayment of the company's debt will decrease its liabilities and increase the shareholder's equity. This increase in shareholders' earnings may also increase the stock price since several use this as a determinant of the company's financial health.
3 Nolan's arguments are all correct. His proposal to do a share repurchase will positively affect the company and its shareholders. First, the share repurchases would increase the company's price-to-earnings (P/E) because there will be fewer shares to divide the earnings from. Second, the buyback would also increase the company's Return-on-assets (RoA) because Net Income increases relative to the company's average total assets. Finally, this would also increase return on equity since there will be less shareholder equity compared to the net income incurred by the company. 
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