Homework Answers
Ex-dividend price
If the stock is about to go ex-dividend, then the price of the stock will be fall to the extent of the after-tax dividend per share
Therefore, the Ex-dividend price = Current Selling price of the stock – After-tax dividend per share
= Current Selling price of the stock – Dividend per share(1 – Tax Rate)
= $87.00 - $8.40(1 – 0.15)
= $87.00 – [$8.40 x 0.85]
= $87.00 - $7.14
= $79.86 per share
“Hence, the ex-dividend price will be $79.86”
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