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Category > Business & Finance Posted 25 May 2017 My Price 5.00

You purchased CSH stock for $40 one year ago and it is now selling for $50

 

  1. You purchased CSH stock for $40 one year ago and it is now selling for $50. The company has announced that it plans a $10 special dividend. You are considering whether to sell the stock now, or wait to receive the dividend and then sell.

    1. Assuming 2008 tax rates, what ex-dividend price of CSH will make you indifferent between

selling now and waiting?

    1. Suppose the capital gains tax rate is 20% and the dividend tax rate is 40%, what ex-dividend price would make you indifferent now?

 

 

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 25 May 2017 11:05 AM My Price 5.00

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file 1495710360-Answer.docx preview (115 words )
Y-----------ou -----------pur-----------cha-----------sed----------- CS-----------H s-----------toc-----------k f-----------or -----------$40----------- on-----------e y-----------ear----------- ag-----------o a-----------nd -----------it -----------is -----------now----------- se-----------lli-----------ng -----------for----------- $5-----------0. -----------The----------- co-----------mpa-----------ny -----------has----------- an-----------nou-----------nce-----------d t-----------hat----------- it----------- pl-----------ans----------- a -----------$10----------- sp-----------eci-----------al -----------div-----------ide-----------nd.----------- Yo-----------u a-----------re -----------con-----------sid-----------eri-----------ng -----------whe-----------the-----------r t-----------o s-----------ell----------- th-----------e s-----------toc-----------k n-----------ow,----------- or----------- wa-----------it -----------to -----------rec-----------eiv-----------e t-----------he -----------div-----------ide-----------nd -----------and----------- th-----------en -----------sel-----------l. ----------- As-----------sum-----------ing----------- 20-----------08 -----------tax----------- ra-----------tes-----------, w-----------hat----------- ex------------di-----------vid-----------end----------- pr-----------ice----------- of----------- CS-----------H w-----------ill----------- ma-----------ke -----------you----------- in-----------dif-----------fer-----------ent----------- be-----------twe-----------en ----------- se-----------lli-----------ng -----------now----------- an-----------d w-----------ait-----------ing-----------? -----------Sup-----------pos-----------e t-----------he -----------cap-----------ita-----------l g-----------ain-----------s t-----------ax -----------rat-----------e i-----------s 2-----------0% -----------and----------- th-----------e d-----------ivi-----------den-----------d t-----------ax -----------rat-----------e i-----------s 4-----------0%,-----------
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