The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Expected Stock Expected Dividend $0 5 10 Capital Gain $10 5 8 Required: a. If each stock is priced at $115, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes. (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? b. Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10%, what would A, B, and each sell for? Assume the expected dividend is a level perpetuity, Complete this question by entering your answers in the tabs below. Req A Reg B If each stock is priced at $115, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (it) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (1) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? (Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Show less Stock Pension Investor Corporation Individual A % B % % % % % % ReqB> The expected pretax return on three stocks is divided between dividends and capital gains in the following way: Stock B C Expected Dividend $0 5 10 Expected Capital Gain $10 5 Required: a. If each stock is priced at $115, what are the expected net percentage returns on each stock to (1) a pension fund that does not pay taxes, (lt) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (t) an individual with an effective tax rate of 10% on dividends and 5% on capital gains? b. Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. If stocks are priced to yield an after-tax return of 10% what would A, B, and each sell for? Assume the expected dividend is a level perpetuity. Complete this question by entering your answers in the tabs below. Reg A Reqs Suppose that investors pay 40% tax on dividends and 10% tax on capital gains. Ir stocks are priced to yield an after-tax return of 10%, what would A, B, and each sell for? Assume the expected dividend is a level perpetuity. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Price Stock B
