Your all-equity firm has beta of 2.0 and a free cash flow today of $10M. The firm is expected to produce a perpetual free cash flow of $12M per year starting next year, that grow at rate of 1 percent per year. Assume a risk free rate of 3.0 percent and an expected market risk premium of 6.0 percent. Your firm has 7M shares outstanding.

After paying a dividend of $2.85 per share, your firm's share price falls to $11.82. This ex-div price is likely because your investors pay:

a. 35% tax on dividends

b. no taxes

c. 20% tax on dividends