Hallo,
maybe you can help me. It is about Dividends and Share Repurchases and Question number 7 of the Elans study material.
So somebody owns 180.000 shares sellng for 28$. Dividend anounced 2.25$. Dividend Tax is 32% Capital gain tax is 15%. Given Reinvestment of all dividends, what is the mv of the investment after reinvestment at the ex-div price.
My calculations: ex div price 26,2
Dividends: 180.000*2,25*(1-0,32)
= 275.400
275.000/26,2= 10.511,5
(180.000+10511,5)*26,2=4991401,3
But this is wrong! In the answer they do not calculate the Divididend after tax before reinvesting in shares:
2.25 * 180000=405000
405000/26.2=15458.02
(180000+15458)*26,2=5120999.6
So my question to you is why Elan do not calculate with dividens after tax?
Thank You!