24 Jul WHAT HAPPENS TO THE EX-DIVIDEND SHARE PRICES?
Here are key financial data for House of Herring Inc.: Earnings per share for 2018 $6.10 Show more Here are key financial data for House of Herring Inc.: Earnings per share for 2018 $6.10 Number of shares outstanding 41.20 million Target payout ratio 50 % Planned dividend per share $3.05 Stock price year-end 2018 $ 160 House of Herring plans to pay the entire dividend early in January 2019. All corporate and personal taxes were repealed in 2017. a. Other things equal what will be House of Herrings stock price after the planned dividend payout? (Round your answer to 2 decimal places.) Stock price $ b-1. Suppose the company cancels the dividend and announces that it will use the money saved to repurchase shares. Will there be a change in the stock price on the announcement date? Yes No b-2. Assume that investors learn nothing about the companys prospects from the announcement. How many shares will the company need to repurchase? (Enter your answer in whole numbers not in millions.) Number of shares Suppose the company increases dividends to $6.10 per share and then issues new shares to recoup the extra cash paid out as dividends. Again assume investors learn nothing from the announcement about House of Herrings prospects. Suppose the company increases dividends to $6.10 per share and then issues new shares to recoup the extra cash paid out as dividends. Again assume investors learn nothing from the announcement about House of Herrings prospects. c-1. What happens to the with-dividend share prices? With-dividend share price $ c-2. What happens to the ex-dividend share prices? (Round your answer to 2 decimal places.) Ex-dividend share price $ c-3. How many shares will need to be issued? (Do not round intermediate calculations. Enter your answer in nearest whole numbers not in millions.) Number of shares Show less
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