P6.10 Wilfred Nadeau owns 200 shares of Consolidated Glue. The company's board of direc- tors recently declared
Question:
P6.10 Wilfred Nadeau owns 200 shares of Consolidated Glue. The company's board of direc- tors recently declared a cash dividend of 50 cents a share payable April 18 (a Wednesday) to shareholders of record on March 22 (a Thursday).
a. How much in dividends, if any, will Wilfred receive if he sells his stock on March 20?
b. Assume Wilfred decides to hold onto the stock rather than sell it. If he belongs to the company's dividend reinvestment plan, how many new shares of stock will he receive if the stock is currently trading at $40 and the plan offers a 5% discount on the share price of the stock? (Assume that all of Wilfred's dividends are diverted to the plan.) Will Wilfred have to pay any taxes on these dividends, given that he is taking them in stock rather than cash?
Step by Step Answer:
Fundamentals Of Investing
ISBN: 9780136117049
11th Edition
Authors: Lawrence J. Gitman, Michael D. Joehnk, Scott B. Smart, Scott J. Smart