Answer the following question twice, once assuming current tax law and once assuming zero tax on capital

Question:

Answer the following question twice, once assuming current tax law and once assuming zero tax on capital gains. Suppose all investments offered the same expected return before tax. Consider two equally risky shares, Hi and Lo. Hi shares pay a generous dividend and offer low expected capital gains. Lo shares pay low dividends and offer high expected capital gains. Which of the following investors would prefer the Lo shares? Which would prefer the Hi shares?

Which should not care?

a. A pension fund.

b. An individual.

c. A corporation.

d. A charitable endowment.

e. A security dealer.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...