Dividends and share Repurchases

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!

Because the formula of

PW – PX = [(1 – TD) / (1 – TCG)] × D

calculate the expected decrease in share price when price goes x dividends, In you answer U solve for PX which is the price after ex dividends.