pril receives 3% every three months in dividend income from her stock investment. She paid $7,150 for the stock and she expects to sell it in 7 years for $9,000. She can reinvest the quarterly dividend income at 3.5% compounded annually. Her salary is $83,000 per year. Her marginal tax rate is 40%, which is also the applicable tax rate on interest income.

The tax rate on dividend income is 22%. HINT: The first questions below are before-tax, the last one is after-tax:

1) What is her annualized HPR _before-tax if she does not reinvest the dividend income? 

2) What is her annualized HPR _before-tax if she reinvests the dividend income?  

 

                                                                                                                                  

 3) What is her annualized HPR _after-tax if she reinvests the dividend income and taxes are paid annually?