Dividend policy and company value: You purchased 4,000 shares of High-Div Co. several years ago at $50 per share. The company has decided to pay a special dividend of $2.00 per share. Dividend payments are taxed at 15 per cent. You intend to reinvest in the company through the dividend reinvestment program. If the company's shares are trading at $48.20 following the dividend payment, how many additional shares can you buy through the dividend reinvestment program?
A) 166 shares
B) 141 shares
C) 134 shares
D) 125 shares

Question

Quizplus · Accepted Answer

You receive $8,000 in dividends (4,000 shares x $2.00). After 15% tax, you have $6,800. At $48.20 per share, you can buy approximately 141 additional shares ($6,800 / $48.20).

Dividend Policy and Company Value: You Purchased 4,000 Shares of High-Div