Suppose that a country has a tax rate on dividends (T_P) of 40%. It has a tax rate on capital gains (T_G) of 20%.

If these taxes affect the stock price on the ex-dividend date, what should happen to the stock price on the

ex-dividend date if a corporation pays a dividend per share of $5

a) A $10 decrease in the stock price.

b) A $3.75 decrease in the stock price.

c) A $3 decrease in the stock price.

d) A $2 decrease in the stock price.