Question

After reading this chapter, it isn't surprising that you're becoming an investment wizard. With your newfound expertise you purchase 100 shares of KSU Corporation for $34.76 per share. Over the next 12 months assume the price goes up to $ 41.43 per share, and you receive a qualified dividend of $0.58 per share. What would be your total return on your KSU 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 percent federal marginal tax bracket and 15 percent long-term capital gains and qualified dividends tax bracket and there is no state income tax on investment income. Your total rate of return on your KSU Corporation investment is nothing%.

Answer #1

P0 = 34.76

P1 = 41.43

D = 0.58

n = 100

Tf = 25%

Tc = 15%

When the stock is sold and gains are realized

Long-term capital gains are taxed at a reduced rate when realized. Short-term capital gains (those held less than or equal to one year) and dividends are always realized and taxed as ordinary income in the year they are paid.

RR = After-tax return on investment = ((*P*1 -
*Po*) (1 - *Tf*) / *Po*) + *C*1(1 -
*Tf*) / *Po*

*=> ((41.43-34.76)*(1-25%))/34.76 + 0.58*(1-25%)/34.76 =
15.64%*

When the stock is held and gains are not realized

RR = After-tax return on investment = ((*P*1 -
*Po*) (1 - *Tc*) / *Po*) + *C*1(1 -
*Tf*) / *Po*

*=> ((41.43-34.76)*(1-15%))/34.76 + 0.58*(1-25%)/34.76 =
17.56%*

**Give a thumbs up if this helped :)**

After reading this chapter, it isn't surprising that you're
becoming an investment wizard. With your newfound expertise, you
purchase 100 shares of KSU Corporation for $28.54 per share.
Assume the price goes up to $ 36.51 per share over the next 12
months and you receive a qualified dividend of $0.54 per share.
What would be your total return on your KSU Corporation
investment? Assuming you continue to hold the stock, calculate
your after-tax return. How is your realized after-tax...

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...

an investment you're considering has an expected return of 8%
and a standard deviation of 6%. the stock is expected to pay
dividens of $0.50 per share over the comming year. What is the
approximate probability that you will earn over 20% on your
investment in the coming year?

Investment Return Goodyear stock ended the previous year at
$20.41 per share. It paid a $0.58 per share dividend last year. It
ended last year at $32.31. If you owned 100 shares of Goodyear,
what was your dollar return and percent return for the year?
Dollar Return = (Ending Value – Beginning Value) + Income
Percentage Return = [(Ending Value – Beginning Value) +
Income]/Beginning Value

You have 6K of spare pre-tax income that you're looking to
invest for the future. Today you are in a combined federal+state
marginal tax bracket of 20%. You are anticipating that in 40 years
your marginal tax bracket on your retirement income will be 18%,
and marginal long term gains bracket will be 12%. You decide to
invest up to the maximum ($5500) in a Traditional IRA, pay taxes on
the remaining $500 and invest it in a taxable account....

Assume that ABC Inc. is considering an investment in the
preferred stock of IBM Corporation. The preferred stock is
currently selling for $100 per share with a $4.50 annual dividend.
ABC Inc. anticipates a one-year holding period and expects to sell
the stock at $100. The corporation is at a 40% average tax rate and
the annual interest rate is 8%. Calculate the after-tax rate of
return.

You bought 400 shares of XYZ over a year ago at $84.00 per
share. During the year, you received $3.25 in dividends per share.
XYZ is now worth $88.00 per share. What is your pretax rate of
return? If you’re in the 25 percent federal income tax bracket and
your dividends and capital gains both qualify for taxation at the
long-term capital gains tax rate (15%), what is your after-tax rate
of return?

Required information [The following information applies to the
questions displayed below.] Tremaine would like to organize UTA as
either an S Corporation or a C corporation. In either form, the
entity will generate a 9 percent annual before-tax return on a
$1,000,000 investment. Tremaine’s marginal income tax rate is 37
percent and his tax rate on dividends and capital gains is 23.8
percent (including the net investment income tax). If Tremaine
organizes UTA as an S corporation he will be...

Tremaine would like to organize UTA as either an S Corporation
or a C corporation. In either form, the entity will generate a 9
percent annual before-tax return on a $1,000,000 investment.
Tremaine’s marginal income tax rate is 37 percent and his tax rate
on dividends and capital gains is 23.8 percent (including the net
investment income tax). If Tremaine organizes UTA as an S
corporation he will be allowed to claim the deduction for qualified
business income. Also, because...

Tremaine would like to organize UTA as either an S Corporation
or a C corporation. In either form, the entity will generate a 9
percent annual before-tax return on a $1,000,000 investment.
Tremaine’s marginal income tax rate is 37 percent and his tax rate
on dividends and capital gains is 23.8 percent (including the net
investment income tax). If Tremaine organizes UTA as an S
corporation he will be allowed to claim the deduction for qualified
business income. Also, because...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 26 minutes ago

asked 31 minutes ago

asked 44 minutes ago

asked 49 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago