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Consider Toews, an unlevered firm with assets valued at approximately $1 billion. Toews has a current stock price of $10 per share, and also has
Consider Toews, an unlevered firm with assets valued at approximately $1 billion. Toews has a current stock price of $10 per share, and also has a policy of not paying dividends. Next consider Jones, with 500 shares of Toews purchased 2 years ago at $13 per share. Jones would like to take some her investment in Toews outside the firm and wishes to create her own $750 dividend. If the capital gains rate is 20%, how much of the homemade dividend of $750 does Jones get to keep?
a. | $700 | |
b. | $500 | |
c. | $150 | |
d. | $750 | |
e. | $600 |
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