Moon, Co. is currently trading at $22.00 per share. The company is paying a regular cash dividend of $0.30 per share, and an extra dividend of $0.05 per share. Tomorrow is the ex-dividend day. The tax rate on dividends is 15 percent. Assuming there is no new information released about the company, how much do you expect the company's stock to trade for tomorrow? (Do not round the intermediate calculation. Round your final answer to two decimal places)

Question

Quizplus · Accepted Answer

The ex-dividend price formula is:
Ex-Dividend Price = Current Price - (Regular Dividend + Extra Dividend) * (1 - Tax Rate)
Ex-Dividend Price = $22.00 - ($0.30 + $0.05) * (1 - 0.15)
Ex-Dividend Price = $21.70
Therefore, the expected stock price for tomorrow is $21.70. The correct choice is A.

Moon, Co Is Currently Trading at $22