The expected pretax return on three stocks is divided between dividends and capital gains in the following way:   Stock Expected Dividend Expected Capital Gain A $0 $10 B 5 5 C 10 0     Required: a. If each stock is priced at $165, 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 10% on dividends and 5% on capital gains? b. Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity.

Assuming the following: 1. 4mm outstanding shares 2. $40mm of pre-tax Net Income 3. $9mm of Depreciation 4. PE multiple of 16x 5. $1.75 quarterly dividend which is expected to grow by 4.23% 6. Book value of $115mm 7. Current share price of $125 8. Tax rate of 25% 9. EBITDA Multiple of 7x. What is the market value of equity? A form of the correct answer would be $53mm.

c)  Calculate the cost of ordinary shares for each capital structure.

What is the annual rate of return on the stock (percentage) before tax?

The answer to B is incorrect. Does the dividend yield need to be factored in?

Required: Find the after-tax return to a corporation that buys a share of preferred stock at $40, sells it at year-end at $40, and receives a $4 year-end dividend. The firm is in the 21% tax bracket. (Round your answer to 2 decimal places.) After-tax rate of return %

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What effect would the calculation performed have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will increasing its dividend per share by 1.75 support or inhibit that goal? Be sure to justify reasoning.

The expected pretax return on three stocks is divided between dividends and capital gains in the following way:   Stock Expected Dividend Expected Capital Gain A $0 $10 B 5 5 C 10 0     Required: a. If each stock is priced at $110, 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. Req A Req B If each stock is priced at $110, 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…

Wyatt Oil pays a regular dividend of $2.0 per share. Typically, the stock price drops by $2.20 per share when the stock goes ex-dividend. Suppose the capital gains tax rate is 24%, but investors pay different tax rates on dividends. Absent transactions cost, the highest dividend tax rate of an investor who could gain from trading to capture the dividend is closest to (%) (2 decimal places):