Question
On 1/1/16, Delta purchased 15% of Alpha common stock for $62,000. Alpha's net income for the years ended December 31 2016 and 2017 were $18,000
On 1/1/16, Delta purchased 15% of Alpha common stock for $62,000. Alpha's net income for the years ended December 31 2016 and 2017 were $18,000 and $56,000 respectively. Alpha declared $2,000 in total dividends to all shareholders in 2016. In 2017, it declared total dividends of $3,000. On 12/31/16, the fair value of Alpha's stock that Delta owned had increased to $70,000; in 2017, it increased to $75,000.
Assume Delta sold all of its shares of Alpha for $75,000 at the end of 2017. Over the entire life of the transaction (from the time Delta bought the investment to the time it sold it), what is the total effect of this investment on Deltas net income for all years combined?
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