The balance sheet for Apple Pie Corp.is shown here in market value terms.There are 5,000 shares of stock outstanding. $$\begin{array}{l}
\text { Market Value Balance Sheet }\
\begin{array} { l r l }
\text { Cash } & \$ 23,000 & \text { Equity } \$ 207,000 \
\text { Fixed assets } & 184,000 & \
\text { Total } \quad \underline { \$ 207,000 } & \text { Total } \$ 207,000
\end{array}
\end{array}$$ The company has declared a dividend of $1.80 per share.The stock goes ex-dividend tomorrow.Ignore any tax effects.What will the price of the stock be tomorrow?

Question

The balance sheet for Apple Pie Corp.is shown here in market value terms.There are 5,000 shares of stock outstanding. $$\begin{array}{l}
\text { Market Value Balance Sheet }\
\begin{array} { l r l } 
\text { Cash } & \$ 23,000 & \text { Equity } \$ 207,000 \
\text { Fixed assets } & 184,000 & \
\text { Total } \quad \underline { \$ 207,000 } &             \text { Total } \$ 207,000
\end{array}
\end{array}$$ The company has declared a dividend of $1.80 per share.The stock goes ex-dividend tomorrow.Ignore any tax effects.What will the price of the stock be tomorrow?

Quizplus · Accepted Answer

Tomorrow's stock price = ($207,000/5,000) - $1.80 = $39.60

The Balance Sheet for Apple Pie Corp The Company Has Declared a Dividend of $1