1. Kathy Snow wishes to purchase shares of countdown computing, Inc. The company's board of directors has declared a cash dividend of $0.72 to be paid holders of record on Wednesday, Sep. 21.
a. What day does this stock begin trading ex dividend?
b. What is the last day that Kathy can purchase the stock (trade date) and still receive the dividend?
c. What change, if any, would expect in the price per share when the stock begins trading on the ex-dividend day?
d. If Kathy held the stock for less than one quarter and then sold it for $53.36 per share, would she achieve a higher investment return by (1) buying the stock prior to the ex-dividend date at $ per share and collecting the $0.72 dividend, or (2) buying it on the ex-dividend date at $48.64 but not receiving the dividend?
2. Chancellor Industries has retained earnings available of $1.24 million. The firm plans to make two investments that require financing of $931,745 and $1.73 million, respectively. Chancellor uses a target capital structure with 64% debt and 36% equity. Apply the residual theory to determine what dividends, if any, can be paid out, and calculate the resulting dividend payout ratio. (Round to the nearest dollar)