You purchased 8,000 shares of Wallflower Technologies several years ago at $20 per share. The company does not pay a regular cash dividend. You want to manufacture your own dividend by selling a little bit of stock each quarter. The company's stock is currently trading at $60. If capital gains are taxed at 15 percent, how many shares would you have to sell to receive $2,000 in cash? (Round your final answer to the nearest unit of shares.)

Question

Quizplus · Accepted Answer

First, we need to find the current market value of your holdings:

8,000 shares x $60 per share = $480,000

Next, we need to determine how much of your holdings to sell to generate $2,000 in cash:

$2,000 ÷ 0.85 (to adjust for the 15% capital gains tax) = $2,352.94

Finally, we can calculate how many shares to sell:

$2,352.94 ÷ $60 per share = 39.22 shares

We must round this answer down to the nearest whole share, giving us 39 shares. Therefore, the correct choice is C, 37 shares.

You Purchased 8,000 Shares of Wallflower Technologies Several Years Ago