1. Assume you (an Australian citizen) own 100,000 shares in QML Corp that operates in the dividend imputation system.  The corporate tax rate is 30%, while your marginal tax rate is 20%.  QML has announced a fully franked dividend of 15 cents per share.  a. How much additional personal tax (beyond the tax already paid on your behalf at the corporate level) will you have to pay on this dividend? b. Suppose the firm is financed by 45% debt and 55% equity.  The return demanded by the firm's bond holders is 5% p.a. and shareholders in this type of firm demand a return of 13.5% p.a. You estimate that γ = 0.55 for this firm. What is the firm's weighted average cost of capital?  Incorporate all tax effects into the WACC

 

 Auto Cheap has a total market value of $125 million, including $25 million of cash. It has debt of $62 million. The company has 12 million shares outstanding. Assume perfect capital markets.

1. If the firm distributes $25 million as a dividend, what will its share price be after the dividend is paid?
2. If instead, the firm distributes $25 million as a share repurchase, what will its share price be once the shares are repurchased?
3. What will its new market debt-equity ratio be after either transaction?