A given share is sold for \(\$ 30\) just before time \(t_{0}\). If the firm pays a \(\$ 3\) dividend per share, the price will immediately drop to \(\$ 27\). Suppose you own 100 shares. If the firm decides not to distribute dividends, you would need to sell 10 shares (at \(\$ 30\) a share) since you need to have a \(\$ 300\) cash income (pre tax) Assume that the shares were originally bought for \(\$ 20\) each.

1. If both ordinary personal tax rate and capital gains tax are \(28 \%\), what is your after-tax wealth under the two alternative situations?

2. Suppose now the tax rates for capital gains are lower, you pay \(40 \%\) tax on ordinary income, and \(16 \%\) tax on capital gains. What is your after-tax wealth under the two alternative situations?