Dividends Formula Memorization

Question 1

How do you estimate share price for a company in future years?

Answer 1

= share price growth % (given) * current share price OR previous year’s share price

Question 2

How do you calculate PER SHARE CAPITAL GAIN at the end of a year?

Answer 2

= End of year share price (from estimated share price, if looking into future) - current share price

Question 3

How do you calculate YOUR TOTAL CAPITA GAIN?

Answer 3

= per share capita gain * number of shares (* exchange rate, IF NECESSARY)

Question 4

How do you calculate income from dividends in future years?

Answer 4

Assuming that the current year is found as a starting point…
= income from dividends in previous year * dividend growth %

Question 5

How do you calculate effective (true) tax rate?

Answer 5

Tax owed on coupons OR capita gain / $ of coupons OR capita gain

Question 6

What is the formula for calculating taxes owed including capita gain

Answer 6

= capita gain * tax rate * .5

Question 7

How do you calculate the price of a preferred share given the dividend $ amt. and required rate of return?

Answer 7

= $ amt. / rate of return %

Question 8

You short-sell 100 stocks for $18 per. Stock price were then increased to $20. How much did you lose?

Answer 8

Loss of -$200 = 100 shares * (18-20)

Question 9

What is the process to taxing dividends?

Answer 9

Dividends > Gross up by 138% > Tax grossed up amt > Get tax credit 25% from grossed up (not taxed yet) > Subtract (grossed up amt thats taxed - tax credit) = owed to tax

Effective tax rate: owed to tax / total amt from dividends received before grossed up