As discussed in the text, in the absence of market imperfections and tax effects, we would expect the share price to

decline by the amount of the dividend payment when the stock goes ex dividend. Once we consider the role of

taxes, however, this is not necessarily true. One model has been proposed that incorporates tax effects into

determining the ex$-$dividend price:

$\frac{(P_0-P_x)}{D}=\frac{(1-T_P)}{(1-T_G)}$

where $P_0$ is the price just before the stock goes ex$,P_x$ is the ex$-$dividend share price, $D$ is the amount of the

dividend per share, $T_P$ is the relevant marginal personal tax rate on dividends, and $T_G$ is the effective marginal

tax rate on capital gains.

a$.$ If $T_P=T_G=0,$ how much will the share price fall when the stock goes ex$?$

$P_x$

$P_0$

$D$

b$.$ If $T_P=19$ percent and $T_G=0,$ how much will the share price fall?

Note: Do not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.$

Decrease in share price

c$.$ If $T_P=20$ percent and $T_G=25$ percent, how much will the share price fall?

Note: Do not round intermediate calculations and round your answer to $4$ decimal places, e$.$g$.,32\mathrm{.}1616.$

d$.$ Suppose the only owners of stock are corporations. Recall that corporations get at least a $50$ percent

exemption from taxation on the dividend income they receive, but they do not get such an exemption on

capital gains. If the corporation's income and capital gains tax rates are both $25$ percent, how much will the

share price fall?

Note: Do not round intermediate calculations and round your answer to $4$ decimal places, e$.$g$.,32\mathrm{.}1616.$