Doorstep, Co. stock is currently trading at $25.70 per share. The company pays a regular cash dividend of $0.40 every quarter. Tomorrow is ex-dividend day for the upcoming regular dividend. Assuming there is no new information released about the company, how much do you expect the company's stock to trade for tomorrow? Assume there are no taxes involved.

Question

Quizplus · Accepted Answer

On the ex-dividend day, the stock price typically drops by the amount of the dividend, which is $0.40. Therefore, the expected stock price would be $25.70 - $0.40 = $25.30.