The Green Fiddle has declared a dividend of $2.60 per share. Suppose capital gains are not taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. Green Fiddle stock closed at $36.80 per share today and the stock goes ex dividend tomorrow. What will be the ex-dividend price?
A) $34.59
B) $39.40
C) $36.80
D) $34.20
E) $34.70

Question

Quizplus · Accepted Answer

The ex-dividend price is the price of the stock after the dividend has been paid. To calculate the ex-dividend price, we need to subtract the dividend from the closing price. In this case, the dividend is $2.60 and the closing price is $36.80. Therefore, the ex-dividend price is $36.80 - $2.60 = $34.20.

The Green Fiddle Has Declared a Dividend of $2