The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend SO Expected Capital Gain $10 10 Required: a. If each stock is priced at $140, what are the expected net percentage retums on each stock to (i) a pension fund that does not pay taxes, (i) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (ii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter15: Dividend Policy
Section: Chapter Questions
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Please provide assistance with the attached questions regarding Finance. 

The expected pretax retum on three stocks is divided between dividends and capital gains in the following way:
Expected Capital
Gain
$10
Expected Dividend
Stock
A
B
5
10
Required:
a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on
dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?
b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected
dividend is a level perpetuity.
Complete this question by entering your answers in the tabs below.
Reg A
Reg B
If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does
not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and
(iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? (Do not round intermediate
calculations. Enter your answers as a percent rounded to 2 decimal places.)
Show less A
Stock
Pension
Investor Corporation
Individual
A
%
%
%
B
%
%
%
%
%
< Req A
Req B >
Transcribed Image Text:The expected pretax retum on three stocks is divided between dividends and capital gains in the following way: Expected Capital Gain $10 Expected Dividend Stock A B 5 10 Required: a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reg B If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Show less A Stock Pension Investor Corporation Individual A % % % B % % % % % < Req A Req B >
The expected pretax return on three stocks is divided between dividends and capital gains in the following way:
Stock Expected Dividend
A
В
C
Expected Capital
Gain
$10
5
$0
10
Required:
a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on
dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?
b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected
dividend is a level perpetuity.
Complete this question by entering your answers in the tabs below.
Reg A
Reg B
Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax
return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round
intermediate calculations. Round your answers to 2 decimal places.)
Stock
Price
A
B
< Req A
Req B >
Transcribed Image Text:The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend A В C Expected Capital Gain $10 5 $0 10 Required: a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reg B Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock Price A B < Req A Req B >
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