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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Wilfred Nadeau owns 200 shares of Consolidated Glue. The company’s board of directors recently declared a cash dividend of 50 cents a share payable on 18 April (a Wednesday) to shareholders of record on 22 March (a Thursday).
a. How much in dividends, if any, will Wilfred receive if he sells his shares on 20 March?
b. Assume Wilfred decides to hold onto the shares rather than sell them. If he belongs to the company’s dividend reinvestment plan, how many new shares will he receive if shares are currently trading at $40 and the plan offers a 5% discount on the share price? (Assume that all of Wilfred’s dividends are diverted to the plan.) Will Wilfred have to pay any taxes on these dividends, given that he is taking them in shares rather than cash?
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