Question

The current stock price of Abacus is $50. For the past 20 years, the firm has paid an annual dividend of $5. On July 26, it announced a dividend of $6 payable on September 10 to shareholders of record at the close of business on September 1.
a. What do you expect to happen to the price of Abacus stock on July 26?
b. If the shareholders of Abacus pay no taxes on dividends, what do you expect to happen to the price of Abacus on the ex-dividend date?
c. If the shareholders of Abacus pay taxes on dividends, do you expect the stock price reaction on the ex-dividend date to be greater, the same, or less than in (b)?



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  • CreatedFebruary 25, 2015
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