Question
2. The Blue Box Corporation (BBC) commits to paying a constant dividend of $5 per share each year, in perpetuity. Suppose that another investment with
2. The Blue Box Corporation (BBC) commits to paying a constant dividend of $5 per share each year, in perpetuity. Suppose that another investment with the same level of systematic risk as BBC's shares has an expected return of 15%.
Now assume that all investors must pay a 20% tax on dividends. What is the share price of BBC in this case?
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Public Finance and Public Policy
Authors: Jonathan Gruber
5th edition
1464143331, 978-1464143335
