Problem 16-30 Dividends and taxes Suppose that there are just three types of investors with the following tax rates: Dividends Capital gains Individuals Corporations Institutions 50% 15% 0% 25 40 0 Individuals invest a total of $82.0 billion in stock and corporations invest $12.40 billion. The remaining stock is held by the institutions. All three groups simply seek to maximize their after-tax income. These investors can choose from three types of stock offering the following pretax payouts per share: Dividends Capital gains Low Payout Medium Payout High Payout $ 7 $ 7 $ 30 17 7 0 These payoffs are expected to persist in perpetuity. The low-payout stocks have a total market value of $102.0 billion, the medium- payout stocks have a value of $52.0 billion, and the high-payout stocks have a value of $122.0 billion. a. Who are the marginal investors that determine the prices of the stocks? b. Suppose that this marginal group of investors requires an after-tax return of 11%. What are the prices of the low-, medium-, and high- payout stocks? C. Calculate the after-tax returns of the three types of stock for each investor group. d. What are the dollar amounts of the three types of stock held by each investor group? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Who are the marginal investors that determine the prices of the stocks? The marginal investors are Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Suppose that this marginal group of investors requires an after-tax return of 11%. What are the prices of the low-, medium-, and high-payout stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price of low-payout stock Price of medium-payout stock Price of high-payout stock Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Calculate the after-tax returns of the three types of stock for each investor group. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Individuals Corporations Institutions % % Low-payout stock Medium-payout stock High-payout stock % % % % % % % Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What are the dollar amounts of the three types of stock held by each investor group? (Enter your answers in billions rounded to 2 decimal places.) Institutions Individuals Corporations Low-payout stock Medium-payout stock High-payout stock Required C Required D