Advanced Vehicle Enterprises AVE follows a policy of paying out
Advanced Vehicle Enterprises (AVE) follows a policy of paying out 50% of its net income as cash dividends to its shareholders each year. The company plans to do so again this year, during which AVE earned $100 million in net profits after tax. The company has 40 million shares outstanding and pays dividends annually.
a. What is the company’s dollar dividend payment per share each year?
b. Assuming that AVE’s stock price is $54 per share immediately before its ex-dividend date, what is the expected price of AVE stock on the ex-dividend date if there are no personal taxes on dividend income received?
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