Question
Suppose that all capital gains are taxed at a 25% rate, and that the dividend tax rate is 50%. Arbuckle Corp. is currently trading for
Suppose that all capital gains are taxed at a 25% rate, and that the dividend tax rate is 50%.
Arbuckle Corp. is currently trading for $30, and is about to pay a $6 special dividend.
- Absent any other trading frictions or news, what will its share price be just after the dividend is paid?
Suppose Arbuckle made a surprise announcement that it would do a share repurchase rather than pay a special dividend.
- What net tax savings per share for an investor would result from this decision?
- What would happen to Arbuckles stock price upon the announcement of this change?
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International Finance
Authors: Keith Pilbeam
2nd Edition
0333730976, 978-0333730973
