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PowerPoints Inc. only pays dividends to its shareholders. The current share price is $85, the company has 200 million shares outstanding, $6,000 million in outstanding
PowerPoints Inc. only pays dividends to its shareholders. The current share price is $85, the company has 200 million shares outstanding, $6,000 million in outstanding debt, and $600 million in excess cash. Assume that the company will use all of its excess cash to pay its shareholders a dividend. For simplicity, also assume that the ex-date is tomorrow and that the dividend will be paid on the ex-date. Assume that markets are perfect (i.e. there are no taxes, no transaction costs, and no information problems). What will happen to the share price on the ex-date (after the dividend has been paid)? Select the best one. The share price will increase to $88. Nothing, the share price will remain at $85. The share price will decline to $83. The share price will decline to $81. The share price will decline to $82
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