Assume the stockholders of Vanderbilt stock are in the 30 percent tax bracket. The closing price...
Assume the stockholders of Vanderbilt stock are in the 30 percent tax bracket. The closing price of the stock today was $45.60 a share. The firm pays a quarterly dividend of $0.50 per share. What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?
Homework Answers
On the ex-dividend day,
Decline in stock price = (1 - tax rate)D
So,
Stock price on ex-dividend date = 45.60 - (1 - 0.30)0.50
Stock price on ex-dividend date = $45.25
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