Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Your firm will pay a dividend of $5.70 per share in perpetuity. The shareholders in your firm have a dividend tax rate of 40 percent.
Your firm will pay a dividend of $5.70 per share in perpetuity. The shareholders in your firm have a dividend tax rate of 40 percent. The tax rate on capital gains is 15 percent. The required rate of return on the company's stock is 11.3 percent compounded annually. Your firm has announced that it will no longer pay a dividend but will use the cash to repurchase shares. By how much will stock price change?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started