Getty Oil has 25 million shares outstanding and has a marginal corporate tax rate of 40%. Getty Oil announces that it will payout $40 million in cash to investors through a special dividend. Shareholders had previously assumed that Getty Oil would retain this excess cash permanently. What is the expected change in Getty Oil's share price upon this announcement? $0.64 $0.96 $1.56 None of these O $0.56

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
Getty Oil has 25 million shares outstanding and has a marginal corporate tax rate of
40%.Getty Oil announces that it will payout $40 million in cash to investors through a
special dividend. Shareholders had previously assumed that Getty Oil would retain this
excess cash permanently. What is the expected change in Getty Oil's share price upon
this announcement?
$0.64
$0.96
$1.56
None of these
$0.56
Transcribed Image Text:Getty Oil has 25 million shares outstanding and has a marginal corporate tax rate of 40%.Getty Oil announces that it will payout $40 million in cash to investors through a special dividend. Shareholders had previously assumed that Getty Oil would retain this excess cash permanently. What is the expected change in Getty Oil's share price upon this announcement? $0.64 $0.96 $1.56 None of these $0.56
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps

Blurred answer
Knowledge Booster
Uses Of Excess Cash
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education