Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Change to high-dividend-payout policy in world of taxes. Kevin currently owns 800 shares of Cylon, Inc. Cylon has a low-dividend-payout policy and this year will
Change to high-dividend-payout policy in world of taxes. Kevin currently owns 800 shares of Cylon, Inc. Cylon has a low-dividend-payout policy and this year will pay a $0.25 cash dividend on its shares, which are selling currently at $23.50. Kevin wants a high-dividend-payout policy of 5% of the stock price, or $940.00 after tax. Assume Kevin bought the stock at $17.50 per share and his tax rates are 40% on dividends and 30% on capital gains. If Kevin changes the dividend policy from a low-dividend-payout policy to a high-dividend-payout policy, how does his wealth change? What is Kevin's wealth in paper and cash under the current low-dividend-payout policy? (Round to the nearest dollar.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started