Suppose that there are just three types of investors with the folowing lax rales: Individuals Corporations Institutions Dividends 40% 20% 11% Capital gairs 20 10 Individuals invest a total of $81.1 billion in stock and corporations invest $11.32 billion. The remaining stock is held by the institutions. All three groups simply soak to maximize their after-tax income These investors can choose from three types of stock affering the following protax payouts per share: Low Payout Medium Payou! Hon Payoul Dividends S 10 $ 35 Capital gains 20 10 D $10 These payoffs are expected to persist in perpetuity. The Irww.payout stocks have a total market value of $101.1 billion, the medium-payout stacks have a value of $51.1 billican, and the high-payout Stacks have a value of $121.1 billion. a. Who are the marginal investors that determine the prices of the stocks? Corporations Institutions Individuals 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? (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 shock S C. Calculate the aller-tax returns of the three types of stock for each investor group (Do not round intermediate calculations. Round your answers to 2 decimal places.) Insitions Individuals Corporations Low payout sack Medium-payout stock % High payout stok S "S d. What are the dollar amounts of the three types of stock held by each investor group? (Leave no calls blank - be certain to enter "o" wherever required. Round your answers to 2 decimal places.) Irelitutions Incividuals Corporation Low-payout Block S Medium-payout stock $ S High-payout stock $ S 9 Suppose that there are just three types of investors with the folowing lax rales: Individuals Corporations Institutions Dividends 40% 20% 11% Capital gairs 20 10 Individuals invest a total of $81.1 billion in stock and corporations invest $11.32 billion. The remaining stock is held by the institutions. All three groups simply soak to maximize their after-tax income These investors can choose from three types of stock affering the following protax payouts per share: Low Payout Medium Payou! Hon Payoul Dividends S 10 $ 35 Capital gains 20 10 D $10 These payoffs are expected to persist in perpetuity. The Irww.payout stocks have a total market value of $101.1 billion, the medium-payout stacks have a value of $51.1 billican, and the high-payout Stacks have a value of $121.1 billion. a. Who are the marginal investors that determine the prices of the stocks? Corporations Institutions Individuals 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? (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 shock S C. Calculate the aller-tax returns of the three types of stock for each investor group (Do not round intermediate calculations. Round your answers to 2 decimal places.) Insitions Individuals Corporations Low payout sack Medium-payout stock % High payout stok S "S d. What are the dollar amounts of the three types of stock held by each investor group? (Leave no calls blank - be certain to enter "o" wherever required. Round your answers to 2 decimal places.) Irelitutions Incividuals Corporation Low-payout Block S Medium-payout stock $ S High-payout stock $ S 9
