Need help You purchased CSH stock for $40 and it is nowselling for $50. The company has announced that itplans a $10 special dividend.A. Assuming 2010 tax rates of 15% on dividendsand capital gains, if you sell the stock or wait andreceive the dividend, will you have different after-tax income?B. Assuming the capital gains tax rate is 20% andthe dividend tax rate is 40% if you sell the stock orwait and receive the dividend, will you have adifferent after-tax income? If the after-tax income isdifferent, why?

Scenario B: Current Tax Rates (20% Capital Gains, 40% Dividends)Selling the Stock:Profit: $50 - $40…

Answered: You purchased CSH stock for $40 and it…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

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You purchased CSH stock for $42 and it is now selling for $53. The company has announced that it plans a $11 special dividend. a. Assuming 2010 tax rates of 15% on dividends and capital gains, if you sell the stock or wait and receive the dividend, will you have different after-tax income? b. Assuming the capital gains tax rate is 21% and the dividend tax rate is 42%, if you sell the stock or wait and receive the dividend, will you have different after-tax income? If the after-tax income is different, why? a. Assuming 2010 tax rates of 15% on dividends and capital gains, if you sell the stock or wait and receive the dividend, will you have different after-tax income? (Select from the drop-down menu.) Assuming 2010 tax rates are 15% on capital gain and 15% on dividends, if you sell the stock or wait and receive the dividend, you have different after-tax income. b. Assuming the capital gains tax rate is 21% and the dividend tax rate is 42%, if you sell the stock or wait and receive the…
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The current stock price of a company is $100 a share. This company announces a dividend of $5 a share. On ex-dividend day the stock price drops $4 to $96 a share. If the tax rate on dividends, D, is 30%, what is the implied tax rate on capital gains, G? You are a tax-exempt institution, and you plan to sell 100 shares (that you already own) of this stock; would you sell them cum- or ex-dividend?
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