Good Values Inc. is all-equity-financed. The total market value of the firm currently is $200,000, and there are 5,000 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?

Stock price $

b. At what price will the stock sell tomorrow?

Stock price $

c.

Now assume that the tax rate on all dividend income is 35% and the tax rate on capital gains is zero. At what price will the stock sell, taking account of the taxation of dividends? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Stock price $

Now suppose that instead of paying a dividend, Good Values plans to repurchase $20,000 worth of stock.

d. What will be the stock price before the repurchase?

Stock price $

e. What will it be after the repurchase?

Stock price $

f. Does the existence of taxes tend to favor dividends or repurchases?

Dividends Repurchases Depends on the dividend and capital gain tax rates