Question

Bowzer Co. has just received $2.7 million from the sale of one of its divisions. The company has 375,000 shares outstanding that sell for $84.13 per share. If the company issues the entire proceeds from the sale as a special dividend, what will the ex-dividend stock price be

Answer 1

Answer:

$76.93 per share

Explanation:

The computation of ex-dividend stock price is shown below:-

Sale of division = $2,7,00,000

Outstanding shares = 375,000

Dividend per share = Sale of division ÷ Outstanding shares

= $2,7,00,000 ÷ 375,000

= $7.2

Stock price after dividend = Sold shares - Dividend per share

= $84.13 - $7.2

= $76.93 per share

Therefore for computing the stock price per dividend we simply subtract dividend per share from sold shares.