If Kevin changes the dividend policy from a​ low-dividend-payout policy to a​ high-dividend-payout policy, how does his wealth​ change?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter4: Income Exclusions
Section: Chapter Questions
Problem 55P
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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?    

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