PRIN.OF CORP.FINANCE-CONNECT ACCESS
PRIN.OF CORP.FINANCE-CONNECT ACCESS
13th Edition
ISBN: 2810023360757
Author: BREALEY
Publisher: MCG
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Chapter 16, Problem 2PS

Dividend payments Seashore Salt Co. has surplus cash. Its CFO decides to pay back $4 per share to investors by initiating a regular dividend of $1 per quarter or $4 per year. The stock price jumps to $90 when the payout is announced.

  1. a. Why does the stock price increase?
  2. b. What happens to the stock price when the stock goes ex dividend?
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