1.What was the effective dividend tax rate for a U.S. investor in the highest tax bracket who planned to hold a stock for one year in 1980

(according to the table shownhere,

YearCapital GainsDividends

1971-197835%70%

1979-198128%70%

1982-198620%50%

198728%39%

1988-199028%28%

1991-199228%31%

1993-199628%40%

1997-200020%40%

2001-200220%39%

2003-201215%15%

2013-20%20%

How did the effective dividend tax rate change in 1982 when the Reagan tax cuts tookeffect? (Ignore statetaxes.)

The effective dividend tax rate for a U.S. investor in the highest tax bracket who planned to hold a stock for one year in 1980 was %. (Round to two decimalplaces.)

In 1982 when the Reagan tax cuts tookeffect, the effective dividend rate was %

2.Que Corporation pays a regular dividend of $1.00 per share.Typically, the stock price drops by $0.85

per share when the stock goesex-dividend. Suppose the capital gains tax rate is 29%, but investors pay different tax rates on dividends. Absent transactionscosts, what is the highest dividend tax rate of an investor who could gain from trading to capture thedividend?

Investors who pay a tax rate lower than % could gain from a dividend capture strategy. (Round to one decimalplace.)

3.5.Assume capital markets are perfect. Kay Industries currently has $200 million invested inshort-term Treasury securities paying 7%and it pays out the interest payments on these securities as a dividend. The board is considering selling the Treasury securities and paying out the proceeds as aone-time dividend payment. Assume investors pay a 12% tax on dividends and capitalgains, and a 35% tax on interestincome, while Kay pays a 35% corporate tax rate.

A. If the board went ahead with thisplan, what would happen to the value of Kay stock upon the announcement of a change inpolicy?Assume that investors pay a 12% tax on dividends and capitalgains, and a 35% tax on interestincome, while Kay pays a 35% corporate tax rate. If the board went ahead with thisplan, the equity value of Kay would go (Down or up)by $million on announcement. (Select from thedrop-down menu and round to the nearestinteger.)

B. What would happen to the value of Kay stock on theex-dividend date of theone-time dividend? (Select the best choicebelow.)

A. The value of Kay would remain the same.

B. The value of Kay would fall by $200 million.

C. The value of Kay would fall by $200$20012%=$176 million.

D. The value of Kay would rise by $200 million.

C.Given these pricereactions, will this decision benefitinvestors?

A. It will neither benefit nor hurt investors.

B. It will benefit investors.

C. It will hurt investors.

D. It's difficult to tell because the price reaction depends on investor preferences.

4.After the market close on May 11, 2001, Adaptec, Inc., distributed a dividend of shares of the stock of its software division, Roxio, Inc. Each Adaptec shareholder receive 0.1686 share of Roxio stock per share of Adaptec stock owned. At the time, Adaptec stock was trading at a price of $10.55 per share (cum-dividend), and Roxio's share price was $14.23 per share. In a perfect market, what would Adaptec's ex-dividend share price be after this transaction?

Theex-dividend share price would be $per share