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Chapter 5: Q7DQ (page 594)

If you buy stock on the ex-dividend date, will you receive the upcoming quarterly dividend?

Short Answer

Expert verified

The shareholder will not receive the dividend if the stock is purchased on the ex-dividend date.

Step by step solution

01

Meaning of ex-dividend date

The ex-dividend date is when the stock is traded in the market without a declared dividend.The ex-dividend date is one day after the record date.

02

Dividend pay-out if the stock is purchased on ex-dividend date

The company will not provide the dividend to the shareholder if the shareholder has purchased the stock on or after the ex-dividend date.To receive the quarterly dividend, the shareholder must have bought the stock one day before the ex-dividend date.

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Most popular questions from this chapter

The Wrigley Corporation needs to raise \(44 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.

  1. If stock is utilized, 2,300,000 shares will be sold to the public at \)20.50 per share. The corporation will receive a net price of \(19 per share. What is the percentage underwriting spread per share?
  2. If bonds are utilized, slightly over 43,700 bonds will be sold to the public at \)1,009 per bond. The corporation will receive a net price of $994 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.)
  3. Which alternative has the larger percentage of spread? Is this the normal relationship between the two types of issues?

The Ellis Corporation has heavy lease commitments. Prior to SFAS No. 13, it merely footnoted lease obligations in the balance sheet, which appeared as follows:

In \( millions
In \) millions

Current assets

\(70

Current liabilities

\)30

Fixed assets

\(70

Long-term liabilities

\)30

Total liabilities

\(60

Stockholder’s equity

\)80

Total assets

\(140

Total stockholder’s equity and liabilities

\)140

The footnotes stated that the company had $14 million in annual capital lease obligations for the next 20 years.

c. Compute total debt to total assets on the original and revised balance sheets.

Tiger Golf Supplies has $25 million in earnings with 7 million shares outstanding. Its investment banker thinks the stock should trade at a P/E ratio of 31. Assume there is an underwriting spread of 7.8 percent. What should the price to the public be?

Jordan Broadcasting Company is going public at \(50 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering, the firm had \)26 million in earnings divided over 11 million shares. The public offering will be for 5 million shares; 3 million will be new corporate shares and 2 million will be shares currently owned by the founding stockholders.

a. What is the immediate dilution based on the new corporate shares that are being offered?

b. If the stock has a P/E of 30 immediately after the offering, what will the stock price be?

c.hould the founding stockholders be pleased with the $50 they received for their shares?

What was the primary purpose of the Securities Act of 1933?

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