It is January 5, 1994 and you plan to buy 1,000 shares in Company ABC and hold them for exactly one year. According to the CAPM, the expected return on ABC equity is 10 percent (pre-personal tax). The current price per share is $30. For now, assume no taxes.
a) ABC will pay a dividend of $2.00 per share next year, where the ex-dividend date is January 5, 1995. What is your total dividend income and expected capital gains income when you sell your shares on January 5, 1995? Keep in mind that you expect the share price to increase by 10 percent, and then drop by the dividend per share at the beginning of January 5, 1995.
Company XYZ is identical to ABC except that it will pay no dividend in the following year.
b) Is your total income (dividends plus expected capital gains) higher if you purchase 1,000 shares in Company XYZ on January 5, 1994 and sell them on January 5, 1995?
Refer to Slide 31 of Week 5. Assume the capital gains tax rate and dividend tax rate that corresponds to January 5, 1995.
c) Calculate the effective dividend tax rate. What is the ex-dividend price per share of ABC?
d) What is your after-tax dividend income and expected after-tax capital gains income for ABC? What about for XYZ? Which stock gives you a higher total income?
Carbon tetrachloride, CCl4, has a vapor pressure of 213 torr at 40°C and 863 torr at 80°C. what is the normal boiling point of CCl4Jun 24 2021
consortium =(a) configuration,(b) partnership or association,(c) royal offspring,(d) rental propertyJul 21 2021
Selling price138Units in beginning inventory500Units produced4100Units sold4300Units in inding inventory300Variable cost per unit:Direct material 31Direct labor 59Variabl...Aug 09 2021
Using the following table as a guide, describe for each function (see Figure 11.1):A risk (an event or action that will cause the organization to fail to meet its goals/o...Sep 18 2020
George S. Avery signed a letter regarding the unpaid balance on a $20,000 promissory note owed to Jim Whitworth in the form of a letter addressed to Whitworth stating: "T...Aug 13 2021
Surface charge of uniform density ρs lies on a spherical shell of radius b, centered at the origin in free space. (a) Find the absolute potential everywhere, with zero re...Jun 14 2020
. How can time be incorporated into the theory of consumer behavior? Explain the following comment: “Want to make millions of dollars? Devise a product that saves America...Dec 05 2019
Here is the 1/1/12 balance sheet of ABC Corporation: Cash 3,500Accts payable 2,950 Accts Rec 5,700 Accrued interest 156 Allowancefor Doubtful accts (570) Notes payable 1,...Jun 12 2021
Insert necessary commas. In the space provided, indicate briefly the reason for each comma. For example, write series, parenthetical, direct address, date, address, essen...Jul 10 2021