Multiple Choice
Haberick Corp's stock pays a dividend of $1.50 and is currently selling for $20, but the firm has not grown in several years. Management feels that a 7% long-term growth rate is possible if the firm discontinues its dividend entirely. Joe Fredrick owns 5,000 shares and would like to keep the stock, but lives on dividend income. How many shares will he have to sell to maintain his income if Haberick stops paying dividends? Ignore transaction costs and tax issues.
A) Sell 375 shares of stock one year from now
B) Sell 350 shares of stock one year from now
C) Sell 350 shares of stock today
D) Sell 375 shares of stock today
Correct Answer:
Verified
Correct Answer:
Verified
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