Suppose that there are just three types of investors with the following tax rates:

Individuals - dividends 40% capital gains 16%

Corporations - dividends 10% capital gains 6%

Insitutions - dividends 0% capital gains 0%

Individuals invest a total of $80.1 Billion in stock and corporations invest $10.12 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.

Low payout - dividends $6 capital gains $16

Medium payout - dividends $6 capital gains $6

High payout - dividends $32 capital gains 0

These payoffs are expected to persist in perpetuity. The low payout stocks have a total market value of $100.1 billion, the medium payout stocks have a value of $50.1 billion, and the high payout stocks have a value of $120.1 Billion.

A. Suppose that this marginal group of investors requires an after tax return of %10. What are the prices of the low, medium, and high payout stocks?

B. Calculate the after-tax returns of the three types of stock for each investor group.

C. What are the dollar amount of the three types of stock held by each investor?