Question
Ms. Gray continues to hold her shares of Philip Morris. The value of the shares increase and she has enjoyed the dividend income for many
Ms. Gray continues to hold her shares of Philip Morris. The value of the shares increase and she has enjoyed the dividend income for many years. A new study was published pointing to additional ways smoking harms peoples health. As a result, the health ministries all over the world are planning to come out with new warnings about the dangers of tobacco, and in the upcoming months all the insurance companies are planning on increasing insurance premiums for people who smoke.
Ms. Gray asks if she should sell her shares before the new insurance policies are implemented, in anticipation of a deep drop in the price of the stock.
Would you advise Ms. Gray to sell all her shares of Philip Morris International now?
A. No. Since the stock has been doing very well recently, she should wait until a day before the new insurance policies are implemented and only then sell. This way she is guaranteed to sell for the highest price.
B. No. The price of insurance premiums for smokers would have no effect on the price per share of PM.
C. Yes. It is reasonable to expect a drop in the value of the shares. And since it looks like the earnings of the company will be severely impacted by the new health study, the dividend will likely be cut.
D. Yes. She should sell the shares now because once the dividend has been cut, the stock will be delisted from the exchange.
Philip Morris International Inc. (PM) NYSE - NYHED Currency in USD Atoch 114.74 +1.68 (+1.49%) A 17401PM EDT Summary Convention Option Analyst Pous Close 113.00 Man Cap 178.216 1D 50 MM VID TV 2 SYNOV MAX 113.14 Beta 0.00* PE Ratio (TTM) 25.61 0.00 EPS (TTM) 48 000 Day's Range Apr 20, 2017 11114.114.87 Eings Date 2 Range SE1147 Dividend & Yield 4.16 p.es) 4105.75 E Dividend Date NA Aug Volum LATA ty Target Est 11414Step by Step Solution
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