A Company is financed only with equity and its shares are listed at a Price of $10 per share. This company announces that it will distribute a dividend of $1 per share. In a world in which there is only a tax dividend of 25% (and there are no other frictions), which of the following sentences is correct?

The share price drops to $9 per share on the day of the dividend announcement.  

The price per share is equal to $9 per share after the ex_dividend date.

The price per share drops to $9.75 per share on the ex_dividend date.

None of the above.

Answer rating: 100% (QA)

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