Whether the price change surprising.

Question

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Answer 1

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

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Answer 2

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

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Answer 3

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

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Answer 4

Question

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Answer 6

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Answer 7

Chapter 14, Problem 1OR

Summary Introduction

To determine: Whether the price change surprising.

Answer 8

Expert Solution

Explanation of Solution

Determine whether the change in price was surprising:

The ex-dividend date is two days before the date of record that will be 15^th May. In the usual case, the stock price will fall by the amount of the dividend when it goes ex-dividend. It is because the stock price indicates that the firm has no claim on the cash used to pay the dividend. Later, the W Company’s stock price raised after it went ex-dividend. Therefore, this sudden change in the market price was surprising.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.

Answer 13

Summary Introduction

To determine: The return that an investor would earn.

Introduction:

Return is a loss or gain incurred on the investment made by the investors. It is expressed in terms of percentage.

Answer 14

Expert Solution

Explanation of Solution

Given information:

W Company has decision to raise the dividend to $0.625 per share. The market price of W Company’s before the ex-dividend is $129 and the market price of stock immediately after the stock ex-dividend is $129.67.

The formula to compute the return that an investor earned is as follows:

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend

Compute the return that an investor earned

Returns earned by investor=(Market price of stock immediately after the stock ex-dividend+Amount of increase in dividend−Market price of stock immediately before the ex-dividend)Market price of stock immediately before the ex-dividend=($129.67+$0.625−$129)$129=$1.295$129=0.01 or 1%

Hence, the return that an investor would earn is 1 percent. This return is not a large return. However, in order to incur this required return the investor has to invest capital for one day.