Axel Reid Owns 10,000 Shares of Pearl Co

question 2

Essay

Axel Reid owns 10,000 shares of Pearl Co.purchased at an average price of $15 per share.The tax rate on both dividends and capital gains is 15%.Would Axel prefer a $2.00 per share dividend or to sell 1000 shares back to the company at $20 per share? Compute his after-tax income from each option.

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Definitions:

Positive Externalities

Benefits experienced by third parties or society at large as a result of an economic activity, without the third party incurring any cost.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning no one can be prevented from using them and one person's use does not reduce availability to others.

Consumer Surplus

The gap between what consumers are prepared and can afford to pay for a product or service, and what they end up paying in reality.

Producer Surplus

The difference between the amount producers are willing to accept for a good versus what they actually receive.