Chapter 17 - Answers to End-of-Chapter Problems 1 Time line of cash dividend Atlantis Manufacturing Inc issues the following press release Atlantis

Chapter 17 - Answers to End-of-Chapter Problems 1 Time line...

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Answers to End-of-Chapter Problems 1.Time line of cash dividend. Atlantis Manufacturing, Inc. issues the following press release: “Atlantis Manufacturing will pay a quarterly dividend of $0.50 per share to record holders as of the 10th of this month on the 20th of this month.” This announcement was made on July 3, 2009. Draw a time line of the dates around this dividend payment with a two-day settlement for stock transactions. Label the declaration date, the ex-date, the record date, and the payment date. 2.Time line of cash dividend. Camelot Manufacturing, Inc. issues the following press release: “Camelot Manufacturing will pay a quarterly dividend of $1.00 per share on the 20th of the following month to record holders as of the 20th of this month.” This announcement was made on September 3, 2009. Draw a time line of the dates around this dividend payment. Draw a time line of the dates around this dividend payment with a two-day settlement for stock transactions. Label the declaration date, the ex-date, the record date, and the payment date. July 3 July 8 July 10 July 20 Declaration Date Ex-date Record Date Payment Date
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3.Stock price around dividend. Using the information in Problem 1, determine what the stock price of Atlantis Manufacturing will be after the cash dividend announcement in a world of no taxes. Assume the current price is $47.12 per share and the price does not change between July 3 and July 20. On what day does the price change? What is the cost to a buyer after the announcement? What is the sales revenue to a seller after the announcement?Note:The problem in the text lists September 3 and October 20 as the dates in question. The dates should be July 3 and July 20. 4.Stock price around dividend. Jenny is going to sell 200 shares of ExxonMobil stock. ExxonMobil has just declared a $0.45 cash dividend per share payable in forty days to registered owners twenty days from now. If on the ex-date the price of ExxonMobil is $61.55 per share, show the total proceeds and the source of the proceeds to Jenny if she sells before the close on the ex-date or waits until the morning after the ex-date. Assume a world of no taxes.
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