Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC, Inc. has just announced today that it would pay $1/share dividends to each shareholder of record on June 5, 2019 (Wed). Its current share

ABC, Inc. has just announced today that it would pay $1/share dividends to each shareholder of record on June 5, 2019 (Wed). Its current share price is $30 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, 2019 (Tue)? (B) What will likely be the price on June 3 (Mon)? (C) Instead of paying $1 in cash, the company announced today that it would use the aggregate equivalent of $1/share dividends to buy back outstand shares, would its share price increase or decline upon the announcement? Explain.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions