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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

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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: 1 (P0PX)/D=(1TP)/(1TG) where P0 is the price just before the stock goes ex, PX is the ex-dividend share price, D is the amount of the dividend per share. Tp is the relevant marginal personal tax rate on dividends, and TG is the effective marginal tax rate on capital gains. a. If TP=TG=0, how much will the share price fall when the stock goes ex? Po PX D b. If TP=15 percent and TG=0, how much will the share price fall? 100 not round Intermedlate calculations ond round your answer to 2 decimal places, e.q., 32.16.) Answer is complete but not entirely correct

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