You own 7,000 shares of No-Drip Co. The company has decided to pay a special dividend of $1.00 per share. Dividend payments are taxed at 15 percent. You intend to reinvest your dividend back into the company, but the company does not have a dividend reinvestment program. To reinvest through your broker, you will have to pay a $46 commission. If the company's stock is trading at $12.43 following the dividend payment, how many additional shares will you be able to purchase? (Round your final answer to the nearest unit of shares.)

Question

Quizplus · Accepted Answer

First, calculate the total dividend received: 7,000 shares * $1.00 = $7,000. After tax (15%), the net dividend is $7,000 * 0.85 = $5,950. Subtracting the $46 commission, you have $5,904 available to reinvest. At a stock price of $12.43, you can purchase $5,904 / $12.43 ≈ 475 shares.

You Own 7,000 Shares of No-Drip Co