### Determine your net return after taxes and inflation

Assignment Help Financial Management
##### Reference no: EM131081470

You purchased 1000 shares of stock in Cumberland Software for \$3 per share on January 1, 2006. Over the next four years you received 7 cents per share annually in dividends. On December 31, 2009 you sell all your shares of Cumberland Software for \$16.50 per share. Brokerage commissions are 4% of the total transaction value when buying and selling. (1) What has been your total gross return (in percent) over the four years? (2) What has been your average annual return over the four years?

You purchased 1000 shares of stock in Cumberland Software for \$3 per share on January 1, 2006. Over the next four years you received 7 cents per share annually in dividends. On December 31, 2009 you sell all your shares of Cumberland Software for \$16.50 per share. Brokerage commissions are 4% of the total transaction value when buying and selling. Now, determine your net return (after taxes and inflation) on Cumberland Software. Assume a marginal tax rate of 31% and a rate of inflation over the four year period of 3.75% per year. (A 31% marginal tax bracket consumer would be taxed 15% for both dividends and capital gains.)

#### Questions Cloud

 Draw up strategic plan for investing the excess funds : As the treasurer of a corporation, one of your jobs is to maintain investments in liquid securities, such as Treasury securities and commercial paper. Your goal is to earn as high a return as possible without taking excessive risk. Draw up a strategi.. What is the company required rate of return : Comfy Coach Travel Agencies has a price of \$72 per share and the dividends have been: 2010 - \$1.25, 2011 - \$1.28, 2012 - \$1.35, 2013 - \$1.42, 2014 - \$1.51. What is the company's required rate of return? (show work) Average annual total return on bonds : The average annual total return on bonds, including the percentage change in the bond prices, has been higher on average when a Republican president in is office. Explain why this statement may or may not be true, offering concrete evidence to suppor.. Change in market value of the firm after the exchange : You own all the equity of ABC Co. The company currently has no debt. The company’s annual cash flow is \$700,000 before interest and taxes. The corporate tax rate is 35%. You have the option to exchange 1/3of your equity position for 4% coupon bonds w.. Determine your net return after taxes and inflation : You purchased 1000 shares of stock in Cumberland Software for \$3 per share on January 1, 2006. Over the next four years you received 7 cents per share annually in dividends. On December 31, 2009 you sell all your shares of Cumberland Software for \$16.. What will the interest charges be if she elects the plans : The price of a new car is \$24,000. Assume that an individual makes a down payment of 25% toward the purchase of the car and secures financing for the balance at the rate of 6%/year compounded monthly. What monthly payment will she be required to make.. Spot rate on treasury bill-determine the expected yield : Given the spot rate on a 90 day(3 month) treasury bill is 1.5% and the spot rate on a 180 day (6 month) treasury bill is 2.5%, determine the expected yield on a 90 day(3 month) treasury bill three months from now. Deferred variable annuity : Kanu has a \$515,000 inside a deferred variable annuity. He put \$500,000 into the annuity and the remaining \$15,000 is growth. He started the annuity exactly one year and one day ago. The sub account for the annuity is 100% invested in stocks. Kanu is.. Depreciation on the equipment to produce the new board : Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for \$27,100, and the company expects to sell 1,560 per year. The company currently sells 2,060 units of its existing model per year..

### Write a Review

#### What are the significant factors of financial statements

What are the significant factors of Financial Statements? Discuss the various tools of financial Analysis and what is a Fund Flow Statement? Discuss the uses and preparation of Fund Flow Statements.

#### Dividend is expected to grow at a constant rate

Asian Trading Company paid a dividend yesterday of \$4 per share. The dividend is expected to grow at a constant rate of 7% per year. The price of Asian Trading Company's stock today is \$25 per share. If Asian Trading Company decides to issue new comm..

#### What will be the net present value of the project

A project generates an operating cash flow of \$20,000 each year. Initially, this 4 year project required \$4,000 in net working capital. All working capital will be recouped at the end of the project. What will be the Net Present Value of the project ..

#### What is the minimum investment yield the company requires

An insurance company’s projected loss ratio is 80 percent and its loss adjustment expense ratio is 18 percent and the dividend ratio is 3 percent. What is the minimum investment yield the company requires to earn a 4% profit?

#### Using constant-growth model-estimate value of giants stock

Giant Enterprises’ stock has a required return of 14.8%. The company, which plans to pay a dividend of \$2.60 per share in the coming year, anticipates that its future dividends will increase at an annual rate consistent with that experienced over the..

#### What is its operating roa

A firm has an ROE of 3%, a debt/equity ratio of 0.7, a tax rate of 30%, and pays an interest rate of 9% on its debt. What is its operating ROA?

#### What required return must investors be demanding

Storico Co. just paid a dividend of \$1.70 per share. The company will increase its dividend by 20 percent next year and will then reduce its dividend growth rate by 5 percentage points per year until it reaches the industry average of 5 percent divid..

#### Pay for the parking deck and lot at the present time

You are considering the purchase of a parking deck close to your office building. The parking deck is a 15-year old structure with an estimated remaining service life of 25 years. If you had the opportunity to invest your money elsewhere and thereby ..

#### Annual contribution to her early retirement fund

Erika and Kitty, who are twins, just received \$35,000 each for their 25th birthdays. They both have aspirations to become millionaires. Each plans to make a \$5,000 annual contribution to her "early retirement fund" on her birthday, beginning a year f..

#### Express the formula and draw the payoff from this bond

In 1986 Standard Oil issued some bonds. At T, investors received \$1000 and an additional amount based on the oil price at that time. The additional amount was 170 times the excess of the oil price over \$25. The maximum additional amount paid was \$255..

#### What are the fundamentals of risk and return

What are the fundamentals of risk and return? How are they relative to standard deviation? How would a financial manager use them?

#### A differential analysis

A differential analysis: A. can be used to compare an alternative to the status quo. B. can be used to compare any set of alternatives. C. is easier to comprehend if a consistent frame of reference is employed. D. B and C. E. A, B, and C.