William purchased 10,000 shares of stock for $10 per share late last month. Due to a proposed hostile takeover of the company, the stock has jumped in price to $16 per share. If he holds the stock for at least a full year, he believes the price will decline to $14 per share but he will be eligible for the 15 percent long-term capital gains rate for his gain. If he sells now, his gain will be subject to his 32 percent marginal tax rate. Should William sell now or wait one year? Use a one-year present value factor of .909 in your evaluation.

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The Answer of William purchased 10,000 shares of stock for $10 per share late last month. Due to a proposed hostile takeover of the company, the stock has jumped in price to $16 per share. If he holds the stock for at least a full year, he believes the price will decline to $14 per share but he will be eligible for the 15 percent long-term capital gains rate for his gain. If he sells now, his gain will be subject to his 32 percent marginal tax rate. Should William sell now or wait one year? Use a one-year present value factor of .909 in your evaluation.

William Purchased 10,000 Shares of Stock for $10 Per Share