TPD Limited, an insurance company, is planning to pay a dividend of $0.50 per share. Most of the investors in TPD Limited are other corporations, who pay 40% of their ordinary income and 28% of their capital gains as taxes. However, they are allowed to exempt 85% of the dividends they receive from taxes. Under the classic tax system, if the shares are selling at $10 per share, how much would you expect the stock price to drop on the ex-dividend day?

A.

$0.65

B.

$0.45

C.

$1.00

D.

$0.50