Reddy owns common stock with a market value of $30,000. The stock pays a cash dividend of

Question:

Reddy owns common stock with a market value of $30,000. The stock pays a cash dividend of $1,200 per year (a 4% annual yield). Reddy is considering selling the stock, which she purchased 13 years ago for $10,000, and using the proceeds to purchase stock in another company with a 10%annual dividend yield. If Reddy's goal is to maximize future dividends on her common stock investments, should she make the sale and purchase the new shares? Assume that Reddy is in the 28%marginal tax rate bracket.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...