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You own 140 shares of stock in Halestorm, Incorporated, that currently sells for $81.85 per share. The company has announced a dividend of $2.85 per share with an ex-dividend date of February 4. Assuming no taxes, what is the value of the stock on February 4?

Question

You own 140 shares of stock in Halestorm, Incorporated, that currently sells for 81.85pershare.Thecompanyhasannouncedadividendof81.85 per share. The company has announced a dividend of 2.85 per share with an ex-dividend date of February 4. Assuming no taxes, what is the value of the stock on February 4?

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Solution

The value of the stock on February 4 would be calculated by subtracting the dividend from the current stock price.

Here's the step-by-step calculation:

  1. The current price of the stock is $81.85.
  2. The company has announced a dividend of $2.85 per share.
  3. On the ex-dividend date, the price of the stock will decrease by the amount of the dividend, because new buyers of the stock will not receive the dividend.
  4. So, the new price of the stock on February 4 would be 81.85(currentprice)81.85 (current price) - 2.85 (dividend) = $79.00.
  5. Since you own 140 shares, the total value of your stock on February 4 would be 140 shares * 79.00=79.00 = 11,060.

This problem has been solved

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