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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: Tp) / (1- TG (Po- Px/ D (1 where Po 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 TGis 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? D OPO PX b. If Tp 27 percent and TG 0, how much will the share price fall? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Share price 40 percent, how much will the share price fall? (Do not c. If Tp 20 percent and TG round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616.) Share price

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