Dividend policy and firm value: You purchased 8,000 shares of NoDiv 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?

Question

Quizplus · Accepted Answer

To receive $2,000 in cash, you need to sell $2,000 / (1 - 0.15) = $2,353. 
To calculate how many shares you need to sell, divide the desired amount by the current stock price: 
$2,353 / $60 = 39.22 shares.
Since you cannot sell a fraction of a share, you need to round up to 40 shares. 
Therefore, the correct answer is C, 37 shares.

Dividend Policy and Firm Value: You Purchased 8,000 Shares of NoDiv