Answered step by step
Verified Expert Solution
Question
1 Approved Answer
ABC, Inc. has just announced today (May 20, Mon) that it would pay $2/share dividends to each shareholder of record on June 5 (Wed). Its
ABC, Inc. has just announced today (May 20, Mon) that it would pay $2/share dividends to each shareholder of record on June 5 (Wed). Its current share price is $45 and its shareholders' average tax rate is 30%. Assume that there are no other news or developments that will affect the stock prices between now and the dates: (A) What will likely be the price of its stock on June 4 (Tue)? (B) What will likely be the price on June 3 (Mon)? (C) Instead of paying $2 in cash, the company announced today that it would use the aggregate equivalent of $2/share dividends to buy back outstand shares over the next 12 months. Would its share price likely to increase or decline upon the announcement? Explain
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started