Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Good Values Inc. is all-equity-financed. The total market value of the firm currently is $250,000, and there are 2,500 shares outstanding. Ignore taxes. a. The

image text in transcribed
Good Values Inc. is all-equity-financed. The total market value of the firm currently is $250,000, and there are 2,500 shares outstanding. Ignore taxes. a. The firm has declared a $6 per share dividend. The stock will go ex-dividend tomorrow. At what price will the stock sell today? b. At what price will the stock sell tomorrow? c. Now assume that the tax rate on all dividend income is 30% and the tax rate on capital gains is zero. At what price will the stock sell today, taking account of the taxation of dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Now suppose that instead of paying a dividend, Good Values plans to repurchase $25,000 worth of stock. What will be the stock price before the repurchase? e. What will it be after the repurchase? f. Does the existence of taxes tend to favor dividends or repurchases? a. Stock price b. Stock price c. Stock price d. Stock price o. Stock price 1. Does the existence of taxes tend to favor dividends or repurchases

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Islamic Finance Law Economics And Practice

Authors: Mahmoud A. El-Gamal

1st Edition

0521864143,0511218117

More Books

Students also viewed these Finance questions