Effects of Dividends on Stock Prices Wren Corp. is expected to pay a dividend of $3.00 per year indefinitely. If the appropriate rate of return on this stock is 12 percent per year, and the stock consistently goes ex-dividend 35 days before dividend payment date, what will be the expected minimum and maximum prices surrounding the dividend payment? First, determine the daily interest rate: 365 iDaily = V1+i.1 Then the maximum stock price, will occur right before the stock goes ex-dividend: Pbefore = [Dividend / (1 + iDaily)(# days from ex-dividend thru payment)] + [(Dividend /i) X (1/(1 + iDaily)# days from ex-dividend thru payment) And the minimum stock price, will occur right after the stock goes ex-dividend: Pafter = (Dividend /i) X (1/(1 + iDaily)# days from ex-dividend to payment) Effects of Dividends on Stock Prices Wren Corp. is expected to pay a dividend of $3.00 per year indefinitely. If the appropriate rate of return on this stock is 12 percent per year, and the stock consistently goes ex-dividend 35 days before dividend payment date, what will be the expected minimum and maximum prices surrounding the dividend payment? First, determine the daily interest rate: 365 iDaily = V1+i.1 Then the maximum stock price, will occur right before the stock goes ex-dividend: Pbefore = [Dividend / (1 + iDaily)(# days from ex-dividend thru payment)] + [(Dividend /i) X (1/(1 + iDaily)# days from ex-dividend thru payment) And the minimum stock price, will occur right after the stock goes ex-dividend: Pafter = (Dividend /i) X (1/(1 + iDaily)# days from ex-dividend to payment)