Posted: March 23rd, 2017

The current required rate of return for the stock is 12%. How much capital gain or loss will Sally have on her shares?

Common stock value: Zero growth Kelsey Drums, Inc., is a well-established

supplier of fine percussion instruments to orchestras all over the United States.

The company’s class A common stock has paid a dividend of $5.00 per share per

year for the last 15 years. Management expects to continue to pay at that amount

for the foreseeable future. Sally Talbot purchased 100 shares of Kelsey class A

common 10 years ago at a time when the required rate of return for the stock was

16%. She wants to sell her shares today. The current required rate of return for the

stock is 12%. How much capital gain or loss will Sally have on her shares?