If Adam Invested $25,000 in a Stock Paying Annual Dividends

question 84

Multiple Choice

If Adam invested $25,000 in a stock paying annual dividends equal to 5% of his investment, what would the value of his investment be 10 years from now assuming that he reinvested his after-tax dividends each year? Assume Adam's marginal ordinary tax rate is 15%.

• A) $26,940
• B) $40,722
• C) $37,905
• D) $101,139
• E) None of these

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Definitions:

Direct Method

A way to prepare a cash flow statement where actual cash flows from operating activities are listed directly.

Custodial Services

Services related to the cleaning and maintenance of buildings and facilities.

Square Feet

A unit of area measurement equivalent to a square that measures one foot on each side.

Direct Method

A way of preparing a cash flow statement where actual cash flow information from the company’s operations is used, directly showing cash receipts and cash disbursements.