Assume that Omicron uses the entire $50 million in excess cash to pay a special dividend.Omicron's ex-dividend price is closest to:

Question

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If Omicron uses the entire $50 million in excess cash to pay a special dividend, the ex-dividend price will be $40.00. This is because the special dividend will reduce the company's retained earnings by $50 million, which will in turn reduce the company's book value by $50 million. The ex-dividend price is the price of the stock after the special dividend has been paid, and it is typically lower than the cum-dividend price (the price of the stock before the special dividend has been paid) by the amount of the special dividend.

Assume That Omicron Uses the Entire $50 Million in Excess