Investors can earn 0.12 after personal tax (e.g., investing in tax-exempt bonds). Their marginal tax rate on
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Investors can earn 0.12 after personal tax (e.g., investing in tax-exempt bonds). Their marginal tax rate on ordinary income is 0.55.
a. What return (after corporate tax) does a corporation have to earn so that the investors are indifferent to receiving a cash dividend now and a cash dividend at time 1?
b. Answer (a) if the deferred dividend will be deferred and will be paid 10 years hence.
c. If the corporation wants to invest new capital obtained from the investors, it has to earn at least ____________. Assume that a dividend will be paid at time 1.
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Related Book For
An Introduction To Accounting And Managerial Finance A Merger Of Equals
ISBN: 9789814273824
1st Edition
Authors: Harold JR Bierman
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