How Much Should an Investor Pay Now for a Stock

question 89

Multiple Choice

How much should an investor pay now for a stock expected to sell for $30 one year from now if the stock offers a $2 dividend, dividends are taxed at 40%, capital gains are taxed at 20%, and a 15% after-tax return is expected on the investment?

• A) $25.04
• B) $26.53
• C) $27.09
• D)$27.50

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Definitions:

Pleural Effusion

Accumulation of fluid in the pleural cavity, the space between the lung and the chest wall, which can impair breathing and is indicative of underlying disease.

Continuous Closed Chest Drainage

A medical procedure where a closed system is used to remove air, blood, or fluid from the pleural space to maintain lung expansion.

Tuberculin Skin Test

A diagnostic test for tuberculosis where tuberculin is injected into the skin and the reaction is measured.

HIV Positive

A status indicating that an individual has been infected with the human immunodeficiency virus, which may weaken their immune system and can lead to AIDS if not treated.