the growing perpetuity model expresses the value of a share of stock as the present 636207

1. On February 17, the board of directors of Exertainment Corp. declared a dividend of $1.25 per share payable on March 18 to all holders of record on March 1. All investors are in the 31 percent tax bracket.

a. What is the ex dividend date?

b. Ignoring personal taxes, how much should the stock price drop on the ex dividend date?

The Benchmark Case: An Illustration of the Irrelevance of Dividend Policy

2. The growing perpetuity model expresses the value of a share of stock as the present value of the expected dividends from that stock. How can you conclude that dividend policy is irrelevant when this model is valid?