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

	Individuals				Corporations				Institutions
Dividends		35	%			20	%				0	%
Capital gains		18				8					0

Individuals invest a total of $81.5 billion in stock and corporations invest $11.80 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		$	8			$	8			$	35
Capital gains			18				8				0

These payoffs are expected to persist in perpetuity. The low-payout stocks have a total market value of $101.5 billion, the medium-payout stocks have a value of $51.5 billion, and the high-payout stocks have a value of $121.5 billion.

a. Who are the marginal investors that determine the prices of the stocks?

	Individuals
	Corporations
	Institutions

b. Suppose that this marginal group of investors requires an after-tax return of 12%. 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 stock	$

c. Calculate the after-tax returns of the three types of stock for each investor group. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

	Institutions	Individuals	Corporations
Low-payout stock	%	%	%
Medium-payout stock	%	%	%
High-payout stock	%	%	%

d. What are the dollar amounts of the three types of stock held by each investor group? (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places.)

	Institutions	Individuals	Corporations
Low-payout stock	$	$	$
Medium-payout stock	$	$	$
High-payout stock	$	$	$