$31.$ Consider the start to$-$day of equally risky, all$-$equity financed firms C and D$,$ each of which has

issued its shares at $$50$ per share. Firm C will pay no dividends but firm D will pay all its earnings

as dividends. In a year from to$-$day, the stock of firm C is expected to be $$65$ per share. Firm D is

expected to pay $$15$ dividend per share at the year$-$end and its price at the year$-$end is expected to

be $$50$ per share. Capital gains are taxed at $20\%$ but the dividends income is taxed at $30\%.$ At

what share price should the stock of firm D be trading today in a competitive market?

a$)$ $$60\mathrm{.}50$

b$)$ $$45\mathrm{.}19$

c$)$ $$52\mathrm{.}42$

d$)$ $$48\mathrm{.}79$

$32.$ A firm with a residual dividend policy has a debt$-$equity ratio of $2\backslash 7.$ What must be its earnings to

set up a $$63,000$ capital budget without issuing new common shares to finance the budget?

a$)$ $$67,000$

b$)$ $$63,000$

c$)$ $$45,000$

d$)$ $$49,000$