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The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend SO Expected Capital Gain $10 10 Required: a. If each stock is priced at $140, what are the expected net percentage retums on each stock to (i) a pension fund that does not pay taxes, (i) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (ii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?

The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend SO Expected Capital Gain $10 10 Required: a. If each stock is priced at $140, what are the expected net percentage retums on each stock to (i) a pension fund that does not pay taxes, (i) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (ii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?

Essentials Of Investments
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
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The expected pretax retum on three stocks is divided between dividends and capital gains in the following way: Expected Capital Gain $10 Expected Dividend Stock A B 5 10 Required: a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reg B If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Show less A Stock Pension Investor Corporation Individual A % % % B % % % % % < Req A Req B >
Transcribed Image Text:The expected pretax retum on three stocks is divided between dividends and capital gains in the following way: Expected Capital Gain $10 Expected Dividend Stock A B 5 10 Required: a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reg B If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Show less A Stock Pension Investor Corporation Individual A % % % B % % % % % < Req A Req B >
The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend A В C Expected Capital Gain $10 5 $0 10 Required: a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reg B Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock Price A B < Req A Req B >
Transcribed Image Text:The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock Expected Dividend A В C Expected Capital Gain $10 5 $0 10 Required: a. If each stock is priced at $140, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains? b. Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reg B Suppose that investors pay 50% tax on dividends and 20% tax on capital gains. If stocks are priced to yield an after-tax return of 8%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Stock Price A B < Req A Req B >
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