Question: Wilfred Nadeau owns 200 shares of Consolidated Glue. The company's board of directors recently declared a cash dividend of 50 cents a share payable April 18 (a Wednesday) to shareholders of record on March 22 (a Thursday).
a. How much in dividends, if any, will Wilfred receive if he sells his stock on March 20?
b. Assume Wilfred decides to hold on to the stock rather than sell it. If he belongs to the company's dividend reinvestment plan, how many new shares of stock will he receive if the stock is currently trading at $40 and the plan offers a 5% discount on the share price of the stock? (Assume that all of Wilfred's dividends are diverted to the plan.) Will Wilfred have to pay any taxes on these dividends, given that he is taking them in stock rather than cash?