Westover Electric is preparing to pay its quarterly dividend of $2.20 a share this quarter. The stock closed at $57.70 a share today. What will the ex-dividend stock price be if the relevant tax rate is 10 percent and all else is held constant?

Question

Quizplus · Accepted Answer

We need to first calculate the amount of the dividend after tax:

$2.20 x (1 - 0.10) = $1.98

Then, we subtract this from the current stock price:

$57.70 - $1.98 = $55.72

Therefore, the ex-dividend stock price will be $55.72 (rounded to the nearest cent), which is option C.

Westover Electric Is Preparing to Pay Its Quarterly Dividend of $2.20