Stock Expected Dividend Expected Capital Gain
A $0 $10
B 5 5
C 10 0
A). If each stock is priced at $125, what are the expected net percentage returns on each stock to (1) a pension fund that does not pay taxes, (2) a corporation paying tax at 45% (the effective tax rate on dividends received by corporations is 10.5%), and (3) an individual with an effective tax rate of 10% on dividends and 5% on capital gains?
B). If each stock is priced at $125, what are the expected net percentage returns on each stock to (1) a pension fund that does not pay taxes, (2) a corporation paying tax at 45% (the effective tax rate on dividends received by corporations is 10.5%), and (3) an individual with an effective tax rate of 10% on dividends and 5% on capital gains?