Metal Fabricators recently sold its poorest performing division and realized net proceeds from the transaction of $1.63 million.The firm has 320,000 shares of stock outstanding and a market price of $49 a share.The firm is now preparing to distribute the entire sale proceeds in the form of a liquidating dividend.What is the best estimate of the ex-dividend stock price? Ignore taxes and market imperfections.

Question

Quizplus · Accepted Answer

The ex-dividend stock price is the market price of the stock after the dividend has been paid. To calculate the ex-dividend stock price, we need to subtract the amount of the dividend from the current market price. In this case, the dividend is $1.63 million / 320,000 shares = $5.10 per share. Therefore, the ex-dividend stock price is $49 - $5.10 = $43.90.

Metal Fabricators Recently Sold Its Poorest Performing Division and Realized