A firm has $300 million of assets that includes $50 million of cash and 10 million shares outstanding.The firm uses $30 million of its cash to pay dividends.If an investor has 1000 shares,how many shares must he sell to create a homemade dividend of $3900.

Question

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To create a homemade dividend of $3900, the investor needs to sell shares equivalent to this amount. The firm pays $30 million in dividends, which is $3 per share ($30 million / 10 million shares). After the dividend, the share price will drop by $3. If the initial share price was $25 ($250 million / 10 million shares), the new price is $22. To get $3900, the investor sells $3900 / $22 = 177.27 shares. However, since the investor already receives $3 per share as a dividend for 1000 shares, they receive $3000. Therefore, they need an additional $900, which requires selling $900 / $22 = 40.9 shares. The closest option is 33.3 shares, but this seems to be a mistake in the options provided.

A Firm Has $300 Million of Assets That Includes $50