× Didn't find what you were looking for? Ask a question
Top Posters
Since Sunday
L
3
d
3
y
3
a
3
n
3
d
3
e
3
d
3
c
3
p
3
M
3
a
3
Home Q & A Board Other Fields Homework Help Business Finance
New Topic  
Memphic Memphic
wrote...
Posts: 728
Rep: 0 0
6 years ago
Wyatt Oil pays a regular dividend of $2.50 per share. Typically the stock price drops by $2.00 per share when the stock goes ex-dividend. Suppose the capital gains tax rate is 20%, but investors pay different tax rates on dividends. Absent transactions cost, the highest dividend tax rate of an investor who could gain from trading to capture the dividend is closest to:
A) 0%
B) 20%
C) 24%
D) 36%
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
Read 987 times
1 Reply

Related Topics

Replies
wrote...
#1
6 years ago
D
Explanation:  D) (Pcum - Pex)(1 - Tg) = DIV(1 - Td) → $2.00 (1 - .20) = $2.50 (1 - Td)
   →   = 1 - Td → Td = 1 -   → td = .36 or 36%
At 36% there would be no benefit to capturing the dividend, the tax rate must be slightly below this amount.
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  1177 People Browsing
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 412
  
 283
  
 1113
Your Opinion
What percentage of nature vs. nurture dictates human intelligence?
Votes: 436
Previous poll results: Which of the following is the best resource to supplement your studies: