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A stock is expected to pay 2% of its value in dividends per year, and grow at a net rate (after dividends) of 7% per
A stock is expected to pay 2% of its value in dividends per year, and grow at a net rate (after dividends) of 7% per year. If the capital gains tax rate is 15% and the ordinary income tax rate is 40%, then what is the expected after-tax return on the stock? Note: Dividends are taxed as ordinary income.
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