The expected pretax return on three stocks Is divided between dividends and capital galns In the following way: Expected Dividend Expected Capital Gain Stock A $0 $10 10 Required: a. If each stock Is priced at $160, what are the expected net percentage returns on each stock to (1) a penslon fund that does not pay taxes, (II) a corporation paylng tax at 21% (the effective tax rate on dividends recelved by corporations Is 6.3%), and (II) an Individual with an effective tax rate of 15% on dividends and 10% on capital galns? b. Suppose that Investors pay 50% tax on dividends and 20% tax on capital galns. If stocks are priced to yleld an after-tax return of 8%, what would A, B, and Ceach sell for? Assume the expected dividend Is a level perpetulty. Complete this question by entering your answers in the tabs below. Req A Req B If each stock is priced at $160, 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 lessa Stock Pension Investor Corporation Individual A % B %
The expected pretax return on three stocks Is divided between dividends and capital galns In the following way: Expected Dividend Expected Capital Gain Stock A $0 $10 10 Required: a. If each stock Is priced at $160, what are the expected net percentage returns on each stock to (1) a penslon fund that does not pay taxes, (II) a corporation paylng tax at 21% (the effective tax rate on dividends recelved by corporations Is 6.3%), and (II) an Individual with an effective tax rate of 15% on dividends and 10% on capital galns? b. Suppose that Investors pay 50% tax on dividends and 20% tax on capital galns. If stocks are priced to yleld an after-tax return of 8%, what would A, B, and Ceach sell for? Assume the expected dividend Is a level perpetulty. Complete this question by entering your answers in the tabs below. Req A Req B If each stock is priced at $160, 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 lessa Stock Pension Investor Corporation Individual A % B %
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 11P
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