You own $100,000 worth of Smart Money stock. One year from now, you will receive a dividend
Question:
You own $100,000 worth of Smart Money stock. One year from now, you will receive a dividend of $2.65 per share. You will receive a dividend of $2.85 two years from now. You will sell the stock for $91 per share three years from now. Dividends are taxed at the rate of 20 percent. Assume there is no capital gains tax. The required aftertax rate of return is 9 percent. How many shares of stock do you own?
DividendA 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...
Step by Step Answer:
To find the number of shares owned we can divide the amount invested by the stock price The ...View the full answer
Corporate Finance Core Principles and Applications
ISBN: 978-1259289903
5th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Related Video
Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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