Example $8-1$

A corporation is planning to pay out its earnings of $$2$ dividend per share. In doing so it will not invest in new projects and the current share price, $$50,$ will stay the same. What is the return in this scenario?

What is the after$-$tax return to the share holder of the stockholder ordinary income tax rate is $30\%$ and capital gain tax is $20\%?$

Alternatively, the corporation could reinvest the earnings such that share price increase to $$52.$ What is the return?

What is the after$-$tax return?