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ABC Inc. is a $42 stock about to pay a $2 cash dividend. Bob Investor owns 80 shares and
wishes that ABC Inc. paid a $3 cash dividend. Please help Bob Investor achieve a cash flow that
is equivalent to the cash flow that he would have received if ABC Inc made the decision to pay a
$3 dividend --- through receiving dividends on all his 80 shares and selling (some of) his shares
ex-dividend. Please specify (i) how much cash Bob will receive in dividends, (ii) how many
shares he must sell ex-dividend and how much cash he will receive from the sale of his shares.

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ABC Inc. is a $42 stock about to pay a $2 cash dividend. Bob Investo.pdf

  • 1. ABC Inc. is a $42 stock about to pay a $2 cash dividend. Bob Investor owns 80 shares and wishes that ABC Inc. paid a $3 cash dividend. Please help Bob Investor achieve a cash flow that is equivalent to the cash flow that he would have received if ABC Inc made the decision to pay a $3 dividend --- through receiving dividends on all his 80 shares and selling (some of) his shares ex-dividend. Please specify (i) how much cash Bob will receive in dividends, (ii) how many shares he must sell ex-dividend and how much cash he will receive from the sale of his shares.