Problem 2: Stock basics (4 points) Tuson Hat Company (THC) decides to pay a divi

Question

Problem 2: Stock basics (4 points) Tuson Hat Company (THC) decides to pay a dividend of $100mm to its shareholders. There are 250mm shares outstanding, and the price-per-share the moment before the dividend is paid is $20 (a) 11.oeN° RHEIch nN >laev will i ill llieesi wllo owns 2),M3 ) wurth of 1 IIC sock (lxli «e the dividend) receive in cash from the dividend? Amount received: (b) What will the per-share price of THC be the moment after the dividend is paid, assuming nothing else changes in that moment? After-dividend price:

Explanation / Answer

a)per share cash dividend received=100mn/250mn
=0.4 per share
25000 worth shares means no of shares=25000/20=12500
=12500*0.4=5000
b)after dividend price=20-0.4=19.6
c)They can buys shares =100*10^6/20=5*10^6
d)the outstanding shares now=
250-5=245mn shares
=100/245=0.41
shares=5000/0.41
=12250 shares

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