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
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
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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Transcribed Image Text: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).
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