After reading this? chapter, it? isn't surprising that? you're becoming an investment wizard. With your newfound...

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After reading this? chapter, it? isn't surprising that? you'rebecoming an investment wizard. With your newfound expertise youpurchase 100 shares of KSU Corporation for $43.53 per share. Overthe next 12 months assume the price goes up to $54.93 per? share,and you receive a qualified dividend of $0.45 per share. What wouldbe your total return on your KSU Corporation? investment? Assumingyou continue to hold the? stock, calculate your? after-tax return.How is your realized? after-tax return different if you sell thestock? In both cases assume you are in the 25 percent federalmarginal tax bracket and 15 percent? long-term capital gains andqualified dividends tax bracket and there is no state income tax oninvestment income.

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3.7 Ratings (427 Votes)


	P0=	43.53
	P1 =	54.93
	D1 =	0.45

	Total retun =	Change in price + Dividend income
		= (P1 - P0) + D1
		= (54.93 - 43.53) + 0.45
		11.85

(i)	Rate of return =		Total Return/Initial price
			=11.85/43.53 X 100
			27.22%

(ii)	a.	If Held then the tax will not be applicable since the gain is not realised
		Post tax return =		27.22%

	b.	If sold -
		Tax on Total return =			11.85 x 15%
					1.7775

		Post tax return =		11.85-1.7775 =	10.0725

		After tax rate of return =			10.0725/43.53 x 100
					23.14%

	Please provide feedback.
	Thanks in advance :-)

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Transcribed Image Text

After reading this? chapter, it? isn't surprising that? you'rebecoming an investment wizard. With your newfound expertise youpurchase 100 shares of KSU Corporation for $43.53 per share. Overthe next 12 months assume the price goes up to $54.93 per? share,and you receive a qualified dividend of $0.45 per share. What wouldbe your total return on your KSU Corporation? investment? Assumingyou continue to hold the? stock, calculate your? after-tax return.How is your realized? after-tax return different if you sell thestock? In both cases assume you are in the 25 percent federalmarginal tax bracket and 15 percent? long-term capital gains andqualified dividends tax bracket and there is no state income tax oninvestment income.