Problem
You purchased CSH stock for $40 one year ago and it is now selling for $50. The company has announced that it plans a $10 special dividend. You are considering whether to sell the stock now, or wait to receive the dividend and then sell.
1) Assuming 2008 tax rates, what ex-dividend price of CSH will make you indifferent between selling now and waiting ($) ? In 2008, the capital gains tax rate is 15%, and the dividend tax rate is 15%.
2) Suppose the stock of Host Hotels & Resorts is currently trading for $20 per share. If Host issued a 20% stock dividend, what will its new share price be ($)?