Question

Westover Electric is preparing to pay its quarterly dividend of $2.20 a share this quarter. The stock closed at $57.70 a share today. What will the ex-dividend stock price be if the relevant tax rate is 10 percent and all else is held constant

Answer 1

Answer:

$55.72

Explanation:

Data provided:

Quarterly dividend paid per share = $2.20

Closing share cost = $57.70 per share

Relevant tax rate = 10%

The dividend per share after the tax deduction

= (100% - 10%) × Quarterly dividend paid per share

= 0.9 × $2.20

= $1.98

Thus, the ex-dividend stock price

= Closing share cost - dividend per share after the tax deduction

= $57.70 - $1.98

= $55.72