a) Ex-Dividend PriceCompany A has declared a dividend of $2.60 per share. Suppose capital gains are nottaxed but dividends are taxed at 15 percent. New IRS regulations require that taxes bewithheld at the time the dividend is paid. The stock closed at $36.80 per share today andthe stock goes ex dividend tomorrow. What will be the ex-dividend price?b) Market value and homemade dividendsAn investor own 100 shares of Firm X. The company will pay 0.50 per share this yearand final liquating dividend of $42 per share next year. The required return of this stockis 14%.Ignoring taxes, what is the current market value of one share of this stock?What will the investor's homemade dividend per share be next year if they do notwant any dividend this year? (hint: buy shares with the dividends this year)

Since you have asked multiple questions, we will solve the first question for you. If you want any…

a) Ex-Dividend Price Company A has declared a dividend of $2.60 per share. Suppose capital gains are not taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The stock closed at $36.80 per share today and the stock goes ex dividend tomorrow. What will be the ex-dividend price?

a) Ex-Dividend Price Company A has declared a dividend of $2.60 per share. Suppose capital gains are not taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The stock closed at $36.80 per share today and the stock goes ex dividend tomorrow. What will be the ex-dividend price?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Change to high-dividend-payout policy in world of taxes. Kevin currently owns 800 shares of Cylon, Inc. Cylon has a low-dividend-payout policy and this year will pay a $0.35 cash dividend on its shares, which are selling currently at $25.00. Kevin wants a high-dividend-payout policy of 7% of the stock price, or $1,400.00 after tax. Assume Kevin bought the stock at $19.00 per share and his tax rates are 25% on dividends and 15% on capital gains. If Kevin changes the dividend policy from a low-dividend-payout policy to a high-dividend-payout policy, how does his wealth change?
Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $8 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 11 percent on the company's stock, how much will you pay for a share today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Current share price
Assume that a company borrows at a cost of 0.08. Its tax rate is 0.35. What is the minimum after-tax cost of capital for a certain cash flow if a. 100 percent debt is used? b. 100 percent common stock? (assume that the stockholders will accept 0.08)
Hot Wings, Inc has an odd divdend policy. The company has just paid a dividend of $8.10 per share and has announced that it will increase the dividend by $6.10 per share for each of the next four years, and then never pay another dividend. Required: If you require a 13.50 percent return on the company's stock, how much will you pay for a share today?
Find the after-tax return to a corporation that buys a share of preferred stock at $58, sells it at year-end at $58, and receives a $4 year-end dividend. The firm is in the 21% tax bracket. (Round your answer to 2 decimal places.)
Dixon Corp’s preferred stock does not mature (it is a “perpetual preferred”). Each share of preferred stock pays a fixed dividend of $5.15 per year, and is currently selling for $62. Estimate Dixon’s marginal cost of preferred equity. Dixon faces a marginal tax rate of 30%. 10.10% 12.04% 5.81% 7.07% 8.31%
c. If Tp = 15 percent and TG = 30 percent, how much will the share price fall? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Share price d. Suppose the only owners of stock are corporations. Recall that Corporations get at least a 50 percent exemption from taxation on the dividend income they receive, but they do not get such an exemption on capital gains. If the corporation's income and capital gains tax rates are both 21 percent, what does this model predict the ex- dividend share price will be? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Share price D N. Elton and M. Gruber, "Marginal Stockholder Tax Rates and the Clientele Effect," Review of Economics and Statistics 52 (February 1970).
Ginger, Incorporated, has declared a $8 per share dividend. Suppose capital gains are not taxed, but dividends are taxed aT 18 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $83 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be?
Premier, Incorporated, has an odd dividend policy. The company has just paid a dividend of $11.00 per share and has announced that it will increase the dividend by $9.00 per share for each of the next four years, and then never pay another dividend. If you require a return of 16 percent on the company's stock, how much will you pay for a share today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Current share price
please answer in 30 mins.
A Corporation issued preferred stocks for P120 per share. The issue price is P20 more than the stock's par value. The company incurred underwriting fees of P10 per share. The stocks will earn annual dividends of P12 per share. If the tax rate is 30%, the cost of capital (preferred stocks) is
3,

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