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17. Late in Year One, a company buys one share of a publicly traded company for P75. This investment is reported as a trading security because the owner plans to sell the stock in the near future. At the end of Year One, this share is only worth P62. However, early in Year Two, the stock price soars to P80 and the stock is sold. A P2 cash dividend is also received by the owner in January of Year Two. What is the reported income effect of this ownership?

17. Late in Year One, a company buys one share of a publicly traded company for P75. This investment is reported as a trading security because the owner plans to sell the stock in the near future. At the end of Year One, this share is only worth P62. However, early in Year Two, the stock price soars to P80 and the stock is sold. A P2 cash dividend is also received by the owner in January of Year Two. What is the reported income effect of this ownership?

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter5: The Cost Of Money (interest Rates)
Section: Chapter Questions
Problem 6PROB
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17. Late in Year One, a company buys one share of a publicly traded company for P75. This investment is reported as a trading security because the owner plans to sell the stock in the near future. At the end of Year One, this share is only worth P62. However, early in Year Two, the stock price soars to P80 and the stock is sold. A P2 cash dividend is also received by the owner in January of Year Two. What is the reported income effect of this ownership? a. No change in income in Year One but a P5 increase in Year Two. b. No change in income in Year One but a P7 increase in Year Two. c. Net income is reduced P13 in Year One but an P18 increase in Year Two. d. Net income is reduced P13 in Year One but a P20 increase in Year Two.
Transcribed Image Text:17. Late in Year One, a company buys one share of a publicly traded company for P75. This investment is reported as a trading security because the owner plans to sell the stock in the near future. At the end of Year One, this share is only worth P62. However, early in Year Two, the stock price soars to P80 and the stock is sold. A P2 cash dividend is also received by the owner in January of Year Two. What is the reported income effect of this ownership? a. No change in income in Year One but a P5 increase in Year Two. b. No change in income in Year One but a P7 increase in Year Two. c. Net income is reduced P13 in Year One but an P18 increase in Year Two. d. Net income is reduced P13 in Year One but a P20 increase in Year Two.
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