Question
Baker Drums, Inc., is a well-established supplier of fine percussion instruments to orchestras all over the United States. The companys class A common stock has
Baker Drums, Inc., is a well-established supplier of fine percussion instruments to orchestras all over the United States. The companys class A common stock has paid a dividend of $7.00 per share per year for the last 12 years. Management expects to continue to pay at that amount for the foreseeable future. Paul Harrison purchased 1,000 shares of Baker class A common 10 years ago at a time when the required rate of return for the stock was 14%. He wants to sell his share today. The current required rate of return for the stock is 10%. How much capital gain or loss will Paul have on his shares?
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