General Manufacturing Company (GMC) follows a policy of paying out 50 percent of its net income as cash dividends to its shareholders each year. The company plans to do so again this year, during which GMC earned $100 million in net profits after tax. The company has 40 million shares outstanding and pays dividends annually.
a. What is the company's nominal dividend payment per share each year?
b. Assuming that GMC's stock price is $54 per share immediately before its ex-dividend date, what is the expected price of GMC stock on the ex- dividend date if there are no personal taxes on dividend income received?