Kathy Snow wishes to purchase shares of Countdown Computing, Inc. The company’s board of directors has declared a cash dividend of $0.80 to be paid to holders of record on Wednesday, May 12.
a. What is the last day that Kathy can purchase the stock (trade date) and still receive the dividend?
b. What day does this stock begin trading ex dividend?
c. What change, if any, would you expect in the price per share when the stock begins trading on the ex dividend day?
d. If Kathy held the stock for less than one quarter and then sold it for $39 per share, would she achieve a higher investment return by (1) buying the stock prior to the ex dividend date at $35 per share and collecting the $0.80 dividend, or (2) buying it on the ex dividend date at $34.20 per share but not receiving the dividend?