Dividends and Other Payouts
19.1.The aftertax dividend is the pretax dividend times one minus the tax rate, so:
Aftertax dividend = $5.60(1 – 0.15) = $4.76
The stock price should drop by the aftertax dividend amount, or:
Ex-dividend price = $75 – 4.76 = $70.24
19.2 a. The shares outstanding increases by 10 percent, so:
New shares outstanding = 20,000(1.10) = 22,000
New shares issued = 2,000
Since the par value of the new shares is $1, the capital surplus per share is $47. The total…
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