Maren received 12 NQOs (each option gives her the right to purchase 13 shares of stock for $10 per share) at the time she starte
d working when the stock price was $8 per share. When the share price was $17 per share, she exercised all of her options. Eighteen months later she sold all of the shares for $22 per share. How much gain will Maren recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent and long-term capital gains rate is 15 percent??
A. $1,872 gain and $281 tax.
B. $0 gain and $0 tax
C. $780gain and $273 tax
D. $780 gain and $117 tax
A. $1,872 gain and $281 tax.
B. $0 gain and $0 tax
C. $780gain and $273 tax
D. $780 gain and $117 tax
1 answer:
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Answer:
There's an error in the numbers for this question; I found the correct one and pasted it below;
"Great Lakes Steel Supply is losing significant market share and thus its managers have decided to decrease the firm's annual dividend. The last annual dividend was $1.30 per share but all future dividends will be decreased by 2.75 percent annually. What is a share of this stock worth today at a required return of 15.5 percent? "
Explanation:
Use dividend discount model (DDM) to calculate the stock price
whereby,
P0 = Current price
D0 = Last dividend paid = 130
g = growth rate = -275% or -2.75 as a decimal
r = required return = 155% or 1.55 as a decimal
Next, plug in the numbers to the DDM formula above;
Therefore this stock is worth $6.93