Using the facts in Exercise 1, assume that Companies X and Y have identical dividend payout ratios

Question:

Using the facts in Exercise 1, assume that Companies X and Y have identical payout ratios of 50 percent. Country Z, your country of domicile, has an income tax rate of 35 percent. Country Z has a tax treaty with countries X and Y so that no withholding taxes are assessed on dividends received. Furthermore, Country Z grants a tax credit for any direct foreign taxes paid.
Required:
Show which company now promises the better after-tax investment performance, and why.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...