The expected pretax return on three stocks Is divided between dividends and capital galns In the following way: Expected Dividend Expected Capital Gain Stock A $0 $10 10 Required: a. If each stock Is priced at $160, what are the expected net percentage returns on each stock to (1) a penslon fund that does not pay taxes, (II) a corporation paylng tax at 21% (the effective tax rate on dividends recelved by corporations Is 6.3%), and (II) an Individual with an effective tax rate of 15% on dividends and 10% on capital galns? b. Suppose that Investors pay 50% tax on dividends and 20% tax on capital galns. If stocks are priced to yleld an after-tax return of 8%, what would A, B, and Ceach sell for? Assume the expected dividend Is a level perpetulty. Complete this question by entering your answers in the tabs below. Req A Req B If each stock is priced at $160, 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 lessa Stock Pension Investor Corporation Individual A % B %
The expected pretax return on three stocks Is divided between dividends and capital galns In the following way: Expected Dividend Expected Capital Gain Stock A $0 $10 10 Required: a. If each stock Is priced at $160, what are the expected net percentage returns on each stock to (1) a penslon fund that does not pay taxes, (II) a corporation paylng tax at 21% (the effective tax rate on dividends recelved by corporations Is 6.3%), and (II) an Individual with an effective tax rate of 15% on dividends and 10% on capital galns? b. Suppose that Investors pay 50% tax on dividends and 20% tax on capital galns. If stocks are priced to yleld an after-tax return of 8%, what would A, B, and Ceach sell for? Assume the expected dividend Is a level perpetulty. Complete this question by entering your answers in the tabs below. Req A Req B If each stock is priced at $160, 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 lessa Stock Pension Investor Corporation Individual A % B %
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:The expected pretax return on three stocks Is divided between dividends and capital galns In the following way:
Expected
Dividend
Expected
Capital
Gain
Stock
A
$0
$10
10
Required:
a. If each stock Is priced at $160, what are the expected net percentage returns on each stock to (1) a penslon fund that does not pay
taxes, (II) a corporation paylng tax at 21% (the effective tax rate on dividends recelved by corporations Is 6.3%), and (II) an Individual
with an effective tax rate of 15% on dividends and 10% on capital galns?
b. Suppose that Investors pay 50% tax on dividends and 20% tax on capital galns. If stocks are priced to yleld an after-tax return of 8%,
what would A, B, and Ceach sell for? Assume the expected dividend Is a level perpetulty.
Complete this question by entering your answers in the tabs below.
Req A
Req B
If each stock is priced at $160, 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 lessa
Stock
Pension
Investor Corporation
Individual
A
%
B
%
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