How much capital gain or loss will Kelsey Drums have on her shares?
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Kelsy Drums is a well established supplier of fine percussion instruments to orchestras all over the United States. The company's class A common stock has paid a dividend of $5 per share per year for the last 15 years. Management expects to continue to pay at that amount for the foreseeable future. Sally Talbot purchased 100 shares of Kelsey Class A stock 10 years ago at a time when the required rate of return for the stock was 16%. She wants to sell her shares today. The current required rate of return for the stock is 12%. How much capital gain or loss will Sally have on her shares?
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Solution Summary
This solution provides step-by-step the formula and calculations for total capital gain and capital gains per share.
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Using the constant growth model, the price of the stock is the present value of all ...
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