An investor has a 35 percent ordinary income tax rate and a 18 percent long-term capital...
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An investor has a 35 percent ordinary income tax rate and a 18 percent long-term capital gains tax rate. The investor holds stock in a firm that could pay its usual $2 per share dividend or reinvest the cash in the firm. The stock price is currently $53 per share. If the firm does not pay the dividend, the share price will rise. If it pays the dividend, the share price will stay the same. By how much must the share price rise if the dividend is not paid in order to make the investor indifferent between receiving the dividend or not? An investor has a 35 percent ordinary income tax rate and a 18 percent long-term capital gains tax rate. The investor holds stock in a firm that could pay its usual $2 per share dividend or reinvest the cash in the firm. The stock price is currently $53 per share. If the firm does not pay the dividend, the share price will rise. If it pays the dividend, the share price will stay the same. By how much must the share price rise if the dividend is not paid in order to make the investor indifferent between receiving the dividend or not?
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To determine the amount by which the share price must rise if the dividend is not paid in order to m... View the full answer
Related Book For
Principles Of Taxation For Business And Investment Planning 2016 Edition
ISBN: 9781259549250
19th Edition
Authors: Sally Jones, Shelley Rhoades Catanach
Posted Date:
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