Jordan Lea has accumulated A substantial portfolio of investments in bonds and shares of public corporations. She selects shears that provide no dividends and maximum long-term growth. But she's risk-averse and will purchase only shares of corporations in secured industries. Currently, All of our investments are achieving capital growth, but her investment in shares of Cory Corporation is providing the lowest yield. This year, her share value of Cory increased to $50,000, a 10% increase from $45,000.Over the previous year period. Corey has consistently maintained this growth rate. The shares were purchased several years ago at a cost of $20,000.

Jordano's investment counselor has recommended that she sell her shares in Cory and use the proceeds to purchase shares in J2 Industries Limited.J2 is in the same industry as Cori, but has recently achieved industry dominance. There is strong evidence that the shares of G2 will maintain a growth rate of 13% annually for the next five years.

Jordan's marginal tax rate is 45%.


 

Required

a.Jordana dispose of the Cory shares and use the process to acquire the J2 shares?
 

B.What rate of return on the J2 shares is required to justify the exchange of securities?

Answer rating: 100% (QA)

To determine whether Jordan should dispose of her Cory shares and use the proceeds to acquire J2 shares we need to calculate the potential benefits an... View the full answer