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 a Assuming 2008 tax rates, what ex dividend price of CSH will ma...

a In 2008 the capital gains tax rate is 15 and the dividend tax rate is 15 The tax on a 10 ...

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

Question:

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 You are considering whether to sell the stock now, or wait to receive the and then sell.
a. Assuming 2008 tax rates, what ex-dividend price of CSH will make you indifferent between selling now and waiting?
b. Suppose the capital gains tax rate is 20% and the tax rate is 40%, what ex-dividend price would make you indifferent now?

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...