# Assume the stockholders of EX stock are in the 28 percent tax bracket. The closing price of the...

## Question:

Assume the stockholders of EX stock are in the 28 percent tax bracket. The closing price of the stock today was $67.18 a share. The firm pays a quarterly dividend of$1.65 per share. What is the expected opening price of the stock tomorrow if tomorrow is an ex-dividend date?

A. $66.72 B.$65.53

C. $67.18 D.$67.61

E. \$65.99

## Ex-Dividend Date:

The ex-dividend date is a critical date concerning the entitlement to the next announced dividend from the stock. Prior to the ex-dividend, the buyer is entitled to the dividend. After the date, the seller is entitled to the dividend.

If market is efficient, then the price of the stock will fall by an amount that is equal to the after-tax dividend at the ex-dividend date, thus the ex-dividend price will be:

• ex-dividend price = 67.18 - 1.65 *(1 - 28%)
• ex-dividend price = 65.992