contestada

schaeffer shippers announced on may 1 that it will pay a dividend of $1.20 per share on june 15 to all holders of record as of may 31st. the firm's stock price closed today at $42 a share. assume all investors are in the 22 percent tax bracket. if tomorrow is the ex-dividend date, what would you expect the opening price to be tomorrow morning assuming all else is held constant?

Respuesta :

Tundexi

Assuming all else is held constant, the opening price of the stock tomorrow morning will be $41.06.

How do we derive the opening price?

The opening price refers to the price at which the stock first trades upon  opening of an exchange on a trading day. In other word, opening price mean the first price a stock trades at when the market opens at 9:30 a.m.

Data

Declared dividend per share = $1.20

Tax on declared dividend per share:

= $1.20 * 22%

= $0.264

Net Declared dividend per share:

= $1.20 - $0.264

= $0.936

Data

Firm's closing stock price per share today = $42

The opening share price tomorrow will be:

= Closing stock price - Net declared dividend

= $42 - $0.936

= $41.06400

= $41.06

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