Assuming an imputation tax system, show the values for A, B, C and D below. Show all workings and attach a minus sign ('-') to the value if it is a cash outflow. (4 marks)

Marginal tax rate45%19%Corporate levelNet Profit Before Tax$3$3Corporate tax (30%)-$0.90-$0.90Net Profit After Tax$2.10$2.10Shareholder levelCash dividends$2.10$2.10Gross-up adjustmentGrossed-up dividendsAAPersonal TaxFranking creditTax payable or refundBCDividend after taxesD

b) ACM Corporation has one million shares outstanding selling at $10 each. It plans to repurchase 200,000 shares at the market price. What will its market capitalisation be after the repurchase? What will its share price be? (2.5 marks)

c) You, as an Australian resident, hold shares in FIN222 Ltd which you purchased 2 years ago for $30 per share. They are now selling for $37 per share. You have a marginal tax rate of 37% while the corporate tax rate is 30%. Under the imputation tax system, would you prefer to receive $7 special dividends or sell the shares and benefit from capital gains? Show all your workings. (4.5 marks)

d) Richmond Ltd has a cost of equity of 12% (calculated assuming a classical tax system), a pre-tax cost of debt of 4.5%, and is financed 60% with equity and 40% with debt. The corporate tax rate is 30%. What is this firm's weighted average cost of capital assuming that investors can utilise 80% of the franking credits paid by the firm? (3 marks)