Kingwood Corporation has a stock price of $120 per share and is contemplating the payment of a

Question:

Kingwood has a stock price of $120 per share and is contemplating the payment of a large, one-time cash of $40 per share. The underlying motivation for the large payout comes from management's belief that the firm has more cash than it can profitably reinvest and that keeping the cash will adversely affects the incentives of the workforce to strive to create shareholder value. Consequently, the firm's management has decided to pay the large cash What do you think the ex-dividend-date price of the company's shares will be? If the firm's management is right about the stimulating effect of disgorging cash, do you think that the drop in stock price after the ex-dividend date will be smaller than otherwise expected? Why or why not?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...