Question
Please show work as i used the hint and still didn't understand the work done The expected pretax return on three stocks is divided between
Please show work as i used the hint and still didn't understand the work done
The expected pretax return on three stocks is divided between dividends and capital gains in the following way:
Stock Expected Dividend Expected Capital Gain
A $0 $10
B $5 $5
C $10 $0
a.a.If each stock is priced at $125, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 45% (the effective tax rate on dividends received by corporations is 10.5%), and (iii) an individual with an effective tax rate of 10% on dividends and 5% on capital gains?(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Stock Pension Investor Corporation Individual
A % % %
B % % %
C % % %
b.Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A, B, and C each sell for? Assume the expected dividend is a level perpetuity.(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Stock Price
A
B
C
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