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

	Individuals				Corporations				Institutions
Dividends		45	%			10	%				0	%
Capital gains		10				40					0

Individuals invest a total of $81.7 billion in stock and corporations invest $12.04 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				Medium Payout				High Payout
Dividends		$	10			$	10			$	32
Capital gains			20				10				0

These payoffs are expected to persist in perpetuity. The low-payout stocks have a total market value of $101.7 billion, the medium-payout stocks have a value of $51.7 billion, and the high-payout stocks have a value of $121.7 billion.

1. Who are the marginal investors that determine the prices of the stocks?
2. Suppose that this marginal group of investors requires an after-tax return of 14%. What are the prices of the low-, medium-, and high-payout stocks?
3. Calculate the after-tax returns of the three types of stock for each investor group.
4. What are the dollar amounts of the three types of stock held by each investor group?

5. (40 Points)

6. Below are several financial statement items for fiscal year 2019 for two airline companies, United Airlines, an international "hub-and-spoke" carrier, and Southwest Airlines, a US domestic "point-to-point" carrier. Use the financial information to answer the questions a), b) and c) below

7. 	United	Southwest
   Net income	$ 3,009	$ 2,300
   Sales	43,259	22,428
   Average assets	50,818	26,069
   Average stockholders equity	10,787	9,843

8. Calculate each companys return on assets (ROA) and return on equity (ROE). Comment on any differences you observe.
9. Disaggregate the ROA for each company into profit margin (PM) and asset turnover (AT). Explain why one of the companies has a higher ROA than the other - is it because of PM or AT or both? Explain the business reasons why this could be.
10. Disaggregate the ROE for each company using the full, traditional Dupont analysis, including ROA as disaggregated in b). Comment on any differences you observe, and explain the business reasons why this could be.

Check my we 6 Suppose that there are just three types of investors with the following tax rates: Individuals 45% 10 Dividends Capital gains Corporations 10% 40 Institutions 0% Individuals invest a total of $81.7 billion in stock and corporations invest $12.04 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 $ 10 20 Dividends Capital gains Medium Payout $10 10 High Payout $ 32 These payoffs are expected to persist in perpetuity. The low-payout stocks have a total market value of $101.7 billion, the medium- payout stocks have a value of $51.7 billion, and the high-payout stocks have a value of $121.7 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 14%. 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? Check my we 6 Suppose that there are just three types of investors with the following tax rates: Individuals 45% 10 Dividends Capital gains Corporations 10% 40 Institutions 0% Individuals invest a total of $81.7 billion in stock and corporations invest $12.04 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 $ 10 20 Dividends Capital gains Medium Payout $10 10 High Payout $ 32 These payoffs are expected to persist in perpetuity. The low-payout stocks have a total market value of $101.7 billion, the medium- payout stocks have a value of $51.7 billion, and the high-payout stocks have a value of $121.7 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 14%. 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