PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
15th Edition
ISBN: 9780137695621
Author: SMART
Publisher: PEARSON C
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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
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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
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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:

Returns=Stock price before ex-dividend+DividendsStock price after the ex-dividendStock price after the ex-dividend

Compute the returns:

Returns=Stock price before ex-dividend+DividendsStock price after the ex-dividendStock price after the ex-dividend=$129.67+$0.625$129$129=1%

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

PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR

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