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# Dividends in the market

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Problem 1:
Midnight Hour Inc. has declared a \$5.10 per-share dividend. Suppose capital gains are not taxed, but dividends are taxed at 15%. New IRS regulations require that taxes be withheld at the time the dividend is paid. Midnight Hour sells for \$83 per share and the stock is about to go ex-dividend. What do you think the ex-dividend price will be?

Problem 7:
The market value balance sheet for Outbox Manufacturing is shown here. Outbox has declared a 25% stock dividend. The stock goes ex-dividend tomorrow (the chronology for a stock dividend is similar to that for a cash dividend). There are 30,000 shares of stock outstanding. What will the ex-dividend price be?

Market Value Balance Sheet:

Cash: \$145,000 Debt: \$127,000
Fixed Assets: \$598,000 Equity: \$616,000
Total: \$743,000 Total: \$ 743,000

#### Solution Preview

Problem 1:

Ex-dividend Price = Declared Dividend - (Declared Dividend x Tax Rate) = \$5.10 ...

#### Solution Summary

The dividends in the market are determined.

\$2.19