ACC 435: WEEK 3 {LATEST 2026 -2027
update} QUESTIONS AND ANSWERS 100%
CORRECT
Hayley recently invested $50,000 in a public utility stock paying a 3 percent annual
dividend. (Hayley's marginal income tax rate is 32 percent and preferential tax rate is
15 percent.)
A) If Hayley reinvests the annual dividend, she receives net of any taxes owed on the
dividend, how much will her investment be worth in four years if the dividends paid are
qualified dividends?
B) What will her investment be worth in four years if the dividends are nonqualified? -
correct answer a) Dividends are qualified (taxed at 15% preferential rate)
Annual after-tax rate of return = 3% x (1 -15%) = 2.55%
Future after-tax value of investment = $50,000 x (1 + 2.55%)^4 = $55,298
,B) Dividends are nonqualified (taxed at 32% ordinary rate)
Annual after-tax rate of return = 3% x (1 -32%) = 2.04%
Future after-tax value of investment = $50,000 x (1 + 2.04%)^4 = $54,207
***In (a), Hayley is getting a preferential rate. In (b), Hayley is paying the ordinary rate.
BUT in neither case is she getting the benefit of deferral
Hayley recently invested $30,000 in a public utility stock paying a 5 percent annual
dividend. (Hayley's marginal income tax rate is 32 percent.) Use Tax Rate Schedule,
Dividends and Capital Gains Tax Rates for reference.
A) If Hayley reinvests the annual dividend she receives net of any taxes owed on the
dividend, how much will her investment be worth in seven years if the dividends paid
are qualified dividends?
,B) What will her investment be worth in seven years if the dividends are nonqualified?
- correct answer a) $40,147.06
Annual after-tax rate of return = 5% x (1 - 15%) = 4.25%
Future after-tax value of investment = 30,000 x (1 + 4.25%)^7 = 40,147.06
B) $37,910.98
Annual after-tax rate of return = 5% x (1 - 32%) = 3.4%
Future after-tax value of investment = 30,000 x (1 + 3.4%)^7 = 37,910.98
Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of
Microsoft common stock (Nasdaq: MSFT) over the years:
, Date Purchased.------ Shares ------ Basis
7/10/2013 -------------- 500 --------- $20,000
4/20/2014 ------------- 400 --------- $18,320
1/29/2015 -------------- 600 --------- $20,160
11/02/2017 ------------- 350 --------- $13,720
If Dahlia sells 1,100 shares of Microsoft for $66,000 on December 20, 2023, what is her
capital gain or loss in each of the following assumptions?
A) She uses the FIFO method.
B) She uses the specific identification method and she wants to minimize her current-
year capital gain. - correct answer capital g/l = amount realized - adjusted basis
A) $20,960
update} QUESTIONS AND ANSWERS 100%
CORRECT
Hayley recently invested $50,000 in a public utility stock paying a 3 percent annual
dividend. (Hayley's marginal income tax rate is 32 percent and preferential tax rate is
15 percent.)
A) If Hayley reinvests the annual dividend, she receives net of any taxes owed on the
dividend, how much will her investment be worth in four years if the dividends paid are
qualified dividends?
B) What will her investment be worth in four years if the dividends are nonqualified? -
correct answer a) Dividends are qualified (taxed at 15% preferential rate)
Annual after-tax rate of return = 3% x (1 -15%) = 2.55%
Future after-tax value of investment = $50,000 x (1 + 2.55%)^4 = $55,298
,B) Dividends are nonqualified (taxed at 32% ordinary rate)
Annual after-tax rate of return = 3% x (1 -32%) = 2.04%
Future after-tax value of investment = $50,000 x (1 + 2.04%)^4 = $54,207
***In (a), Hayley is getting a preferential rate. In (b), Hayley is paying the ordinary rate.
BUT in neither case is she getting the benefit of deferral
Hayley recently invested $30,000 in a public utility stock paying a 5 percent annual
dividend. (Hayley's marginal income tax rate is 32 percent.) Use Tax Rate Schedule,
Dividends and Capital Gains Tax Rates for reference.
A) If Hayley reinvests the annual dividend she receives net of any taxes owed on the
dividend, how much will her investment be worth in seven years if the dividends paid
are qualified dividends?
,B) What will her investment be worth in seven years if the dividends are nonqualified?
- correct answer a) $40,147.06
Annual after-tax rate of return = 5% x (1 - 15%) = 4.25%
Future after-tax value of investment = 30,000 x (1 + 4.25%)^7 = 40,147.06
B) $37,910.98
Annual after-tax rate of return = 5% x (1 - 32%) = 3.4%
Future after-tax value of investment = 30,000 x (1 + 3.4%)^7 = 37,910.98
Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of
Microsoft common stock (Nasdaq: MSFT) over the years:
, Date Purchased.------ Shares ------ Basis
7/10/2013 -------------- 500 --------- $20,000
4/20/2014 ------------- 400 --------- $18,320
1/29/2015 -------------- 600 --------- $20,160
11/02/2017 ------------- 350 --------- $13,720
If Dahlia sells 1,100 shares of Microsoft for $66,000 on December 20, 2023, what is her
capital gain or loss in each of the following assumptions?
A) She uses the FIFO method.
B) She uses the specific identification method and she wants to minimize her current-
year capital gain. - correct answer capital g/l = amount realized - adjusted basis
A) $20,960
