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Sarge plc has just announced that it intends to pay a dividend of 20p. You bought shares in the company earlier in the year when
Sarge plc has just announced that it intends to pay a dividend of 20p. You bought shares in the company earlier in the year when their price was 200p but this has now increased to 500p. You have decided to sell the shares but remain undecided whether to do so now or after the payment of the dividend. You are liable to capital gains tax at 20 per cent and income tax at 40 per cent.
How much will the share price have to fall on the ex-dividend day for you to be indifferent between selling now or after the ex-dividend day?
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