The Yttepmot Corporation has just declared a dividend of $1. The average investor in Yttepmot faces an ordinary tax rate of 50%. While the capital gains tax is also 50%, it is believed that the investor gets the advantage of deferring this tax until future years; in other words, the effective tax rate on capital gains will therefore be 50% discounted back to the present. If the price of the stock before the ex-dividend day is $10 and it drops to $9.20 at the ex-dividend date, for how many years is the average investor deferring capital gains taxes? Assume that the opportunity cost (discount rate) used by the investor in evaluating future cash flows is 10%, that taxes on dividend payments are paid at the time that the dividend is received, and that taxes on capital gains are paid at the time that the stock is sold.

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