A stock is currently priced at $65 per share and will pay a $4 dividend in one year. What must the stock sell for in one year to meet investors' expectations of a 15% after-tax yield if dividends are taxed at 28%? Ignore capital gains taxes due to investor timing.
A) $70.75
B) $71.87
C) $73.63
D)$76.00

Question

Quizplus · Accepted Answer

0.15 = ($4/$65)(1 - 0.28) + (P₁ - $65)/$65; P₁ = $71.87

A Stock Is Currently Priced at $65 Per Share and Will