1.The expected pretax return on three stocks is divided between dividends and capital gains in the following way:

StockExpected DividendExpected Capital Gain

A$0$10

B55

C100

a.If each stock is priced at $140, 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 35% (the effective tax rate on dividends received by corporations is 10.5%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

Stockpensioninvestor corporationindividual

A--------%----------%--------%

B----------%-----------%---------%

C----------%-----------%----------%

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.(Do not round intermediate calculations. Round your answers to 2 decimal places.)

Stock price

A---------

B----------

C----------

2. Company X sells on a 1/10, net 60, basis. Company Y buys goods with an invoice of $2,000.

a.How much can company Y deduct from the bill if it pays on day 10?(Do not round intermediate calculations.)

b.How many extra days of credit can company Y receive if it passes up the cash discount?

c.What is the effective annual rate of interest if Y pays on the due date rather than day 10?(Use 365 days in a year. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)