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Blue Mountain Roasters Inc. only pays dividends to its shareholders. The current share price is $20, the company has 75 million shares outstanding, $300
Blue Mountain Roasters Inc. only pays dividends to its shareholders. The current share price is $20, the company has 75 million shares outstanding, $300 million in outstanding debt, and $150 million in excess cash. Assume that the company will use all of its excess cash to pay its shareholders a dividend. For simplicity, also assume that the ex-date is tomorrow and that the dividend will be paid on the ex-date. Assume that market are not perfect, and that the only market imperfection are taxes. If the tax rate on dividends is 20% and the tax rate on capital gains is 15%, what will happen to the share price on the ex-date? Select the best one. OLThe share price will decline to $17.95. The share price will decline to $18.5 C.The share price will decline to $18.12. ON. The share price will decline to $18 OV. Nothing, the share price will remain at $20,
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