Mercury, Co. has announced it will pay its regular cash dividend of $0.45 per share. If dividends are taxed, about how much do you expect the price of Mercury, to drop on the ex-dividend day? The tax rate on dividends is 15 percent. (Round your final answer to two decimal places.)

Question

Quizplus · Accepted Answer

The price drop on the ex-dividend day can be calculated by multiplying the dividend amount by the dividend tax rate: $0.45 * 0.15 = $0.0675, which is rounded to $0.07. Therefore, the best choice is B since it is the closest option to $0.07.