Your firm will pay a dividend of $5.00 per share in perpetuity. The shareholders in your firm have a dividend tax rate of 38 percent. The tax rate on capital gains is 11 percent. The required rate of return on the company's stock is 10.1 percent compounded annually. Your firm has announced that it will no longer pay a dividend but will use the cash to repurchase shares. By how much will stock price change?

Answer rating: 100% (QA)

When your firm switches from paying dividends to repurchasing shares the stock price will likely dec... View the full answer