Purchase Solution

Ex-dividend price of a share

Not what you're looking for?

Ask Custom Question

Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding with a current market price of $15 per share. Natsam's board has decided to pay out this cash as a one-time dividend.

a) What is the ex-dividend price of a share in a perfect capital market?

b) If the board instead decided to use the cash to do a one-time share repurchase, in a perfect capital market what is the price of the shares once the repurchase is complete?

c) In a perfect capital market, which policy, in part (a) or (b), makes investors in the firm better off?

Purchase this Solution
Solution Summary

The solution computes ex-dividend price of a share in a perfect capital market.

Solution Preview

(a). The dividend payment per share = 250/500 = $0.50

In a perfect capital market the ex-dividend ...

Purchase this Solution
Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • Determining the Ex-Dividend Price

    305239 Determining ex-dividend price A model that incorporates tax effects into determining the ex-dividend price is; (P0-Px)/D=(1-Tp)/(1-Tg) where P0 is the price just before the stock goes ex, Px is the ex-dividend share price, D is the amount the

  • Ex-Dividend Share Price

    19245 Ex-Dividend Share Price A portfolio has 200 shares of a company's stock. The stock currently sells for $105.00 per share. The company has announced a dividend of $1.50 per share with an ex-dividend date of April 19th.

  • Dividends in the market

    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?

  • Conversion ratio, Ex-dividend date

    Ex dividend date and ex dividend price.

  • Repurchase of Stock

    Dividends= $550,000 Number of shares= 275,000 Therefore, dividend per share= $2.00 =550000/275000 Ex dividend price= $45.00 Ex dividend price is theoretically equal to cum dividend price minus dividend per

  • Ex-dividend stock price

    336803 Ex-dividend stock price Westover Electric is preparing to pay its quarterly dividend of $2.20 a share this quarter. The stock closed at $57.70 a share today.

  • Ohio Freight Company's

    The new price of the stock should be $39.33. This solution is comprised of a detailed explanation to answer by how much should the stock go down on the ex-dividend date.

  • E-dividend date /price of stock

    277181 E-dividend date /price of stock Drew Financial Associates currently pays a quarterly dividend of 50 cents per share. This quarter's dividend will be paid to stockholders of record on Friday, February 22, 2007.

  • Dividends and Taxes, Stock Split and Stock Dividend

    The stock goes ex dividend tomorrow. There are 30,000 share of stock outstanding. What will the ex-dividend price be?

View More Related Solutions