A company just announced a 6.00% stock dividend. The stock closed at $38.58 the day before...
A company just announced a 6.00% stock dividend. The stock closed at $38.58 the day before the ex-dividend date. Assuming no other events happened overnight, what will be the opening price for the stock on the ex-dividend date?
hint
Stock price will adjust to stock dividend in such a way that investors' wealth will NOT change after the ex-dividend date.
Homework Answers
STock price after ex div date = Price before stock Div [ 1 + StockDiv ]
= $ 38.58 / [ 1 + 0.06 ]
= $ 38.58 / 1.06
= $ 36.40
If Price after stock div is $ 36.40, Investor wealth will not change due to Stock div issue.
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