Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Question
Chapter 14, Problem 1OR
Summary Introduction
To determine: The date the stock goes on ex-dividend and whether the change in the stock price is surprising.
Expert Solution
Explanation of Solution
Two day before the date of record is ex-dividend date. So in the case the ex-dividend date is May 15. Usually the stock price will drop by the amount of dividend during the ex-dividend whereas the stock price has gone up after the ex-dividend date so it is a surprising element.
Summary Introduction
To determine: The returns earned by the investor before the ex-dividend date.
Expert Solution
Explanation of Solution
Given information:
Stock price before ex-dividend is $129, dividends of $0.625 per share, and market price of stock after the ex-dividend is $129.
The formula to calculate the returns:
Compute the returns:
Hence, the return is 1%.
Therefore, the return is not a much big return so the firm must have a capital to be invested in for a day to earn the required return.
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Chapter 14 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 14.1 - What two ways can firms distribute cash to...Ch. 14.1 - Why do rapidly growing firms generally pay no...Ch. 14.1 - The dividend payout ratio equals dividends paid...Ch. 14.2 - Prob. 14.4RQCh. 14.2 - Prob. 14.5RQCh. 14.2 - What benefit is available to participants in a...Ch. 14.3 - Does following the residual theory of dividends...Ch. 14.3 - Contrast the basic arguments about dividend policy...Ch. 14.4 - Prob. 14.9RQCh. 14.5 - Describe a constant-payout-ratio dividend policy,...
Ch. 14.6 - Why do firms issue stock dividends? Comment on the...Ch. 14.6 - Compare a stock split with a stock dividend.Ch. 14 - Prob. 1ORCh. 14 - Prob. 14.1STPCh. 14 - Prob. 14.1WUECh. 14 - Prob. 14.2WUECh. 14 - Prob. 14.3WUECh. 14 - Prob. 14.4WUECh. 14 - Prob. 14.5WUECh. 14 - Dividend payment procedures At the quarterly...Ch. 14 - Prob. 14.2PCh. 14 - Prob. 14.3PCh. 14 - Dividend constraints The Howe Companys...Ch. 14 - Prob. 14.5PCh. 14 - Low-regular-and-extra dividend policy Bennett Farm...Ch. 14 - Alternative dividend policies Over the past 10...Ch. 14 - Alternative dividend policies Given the earnings...Ch. 14 - Stock dividend: Firm Columbia Paper has the...Ch. 14 - Cash versus stock dividend Milwaukee Tool has the...Ch. 14 - Stock dividend: Investor Sarah Warren currently...Ch. 14 - Stock dividend: Investor Security Data Company has...Ch. 14 - Stock split: Firm Growth Industries current...Ch. 14 - Prob. 14.14PCh. 14 - Stock split versus stock dividend: Firm Mammoth...Ch. 14 - Prob. 14.16PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.18PCh. 14 - Prob. 14.19P
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