Stephens, Inc currently pays a $3 per share dividend, but is considering eliminating the dividend and...
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Stephens, Inc currently pays a $3 per share dividend, but is considering eliminating the dividend and using the savings to repurchase shares. Investments of similar risk to Stephens provide an after-tax return of 12%. Assume the marginal investor pays a 25% tax on dividends but only 10% on capital gains. What is the expected change in Stephen's Inc. stock price when management announces this change in payout policy? a. $0 b. $4.17 c. $20.83 d. $25.00 Stephens, Inc currently pays a $3 per share dividend, but is considering eliminating the dividend and using the savings to repurchase shares. Investments of similar risk to Stephens provide an after-tax return of 12%. Assume the marginal investor pays a 25% tax on dividends but only 10% on capital gains. What is the expected change in Stephen's Inc. stock price when management announces this change in payout policy? a. $0 b. $4.17 c. $20.83 d. $25.00
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Answer The correct answer is c 2083 Heres why When Stephens Inc eliminates the dividend and uses the ... View the full answer
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
Posted Date:
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