Question

# You purchase 100 shares of USK Corporation for \$41.71 per share. Assume the price goes up...

You purchase 100 shares of USK Corporation for \$41.71 per share. Assume the price goes up to \$50.34 per share over the next 12 months and you received a qualified dividend of \$0.67 per share. What would be your total return on your USK Corporation investment? Assuming you continue to hold the stock, calculate your after-tax return. How is your realized after tax return different if you sell the stock? In both cases assume you are in the 25% Federal marginal tax bracket and 15% long-term capital gains and qualified dividends tax bracket and if there is no state income tax on investment income.
your total rate of return on your USK Corporation investment is __%

#### Homework Answers

Answer #1

Answer :

Here, we have

Stock price gain = 50.34 - 41.71 = \$ 8.63

Dividend = \$ 0.67

Total gain = \$ 8.63 + \$ 0.67 = \$ 9.30

Total Rate of Return = 9.30 / 41.71

Total Rate of Return = 22.30%

There will be no taxes as i am not selling the share and realizing a profit. There are no taxes on unrealized profit. I will only need to pay taxes on the dividend i received.

Stock price gain = 50.34 - 41.71 = \$ 8.63

After-tax dividend = \$ 0.67 ( 1 - 0.15 ) = 0.5695

Total gain = \$ 8.63 + \$ 0.5695 = \$ 9.1995

Total After-tax Rate of Return = 9.1995 / 41.71

= 22.06%

Know the answer?
Your Answer:

#### Post as a guest

Your Name:

What's your source?

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Not the answer you're looking for?
Ask your own homework help question
ADVERTISEMENT
##### Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

ADVERTISEMENT