Question

3. Lee Ann Inc. has declared a $5.40 per share dividend. Suppose capital gains are not...

3. Lee Ann Inc. has declared a $5.40 per share dividend. Suppose capital gains are not taxed, but dividends are taxed at 15 percent. Lee Ann sells for $75 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Answer:
After tax Dividend
               =    Dividend Price x (1 (-) Tax rate )
               =    $ 5.40 x ( 1- 15% )
               =     $ 5.40 x 0.85		 $ 4.59
Ex-dividend Price
              = Share issue Price (-) After tax Dividend
              =    $ 75 (-) $ 4.59		 $ 70.41
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Lee Ann, Inc., has declared a $6.00 per share dividend. Suppose Capital gains are not taxed,...
Lee Ann, Inc., has declared a $6.00 per share dividend. Suppose Capital gains are not taxed, but dividends are taxed at 15 percent. Lee Ann sells for $80 per share, and the stock is about to go exdividend. What do you think the ex-dividend price will be?
The next dividend payment by Mosby, Inc., will be $2.65 per share. The dividends are anticipated...
The next dividend payment by Mosby, Inc., will be $2.65 per share. The dividends are anticipated to maintain a 6.50 percent growth rate, forever. Assume the stock currently sells for $48.90 per share.    Requirement 1: What is the dividend yield? (Do not include the percent sign (%). Round your answer to 2 decimal places (e.g., 32.16).)      Dividend yield %      Requirement 2: What is the expected capital gains yield? (Do not include the percent sign (%). Round your...
Suppose that all capital gains are taxed at a 23% ​rate, and that the dividend tax...
Suppose that all capital gains are taxed at a 23% ​rate, and that the dividend tax rate is 41%. Arbuckle Corp. is currently trading for ​$43​, and is about to pay a ​$5 special dividend. a. Absent any other trading frictions or​ news, what will its share price be just after the dividend is​ paid? Suppose Arbuckle made a surprise announcement that it would do a share repurchase rather than pay a special dividend. b. What net tax savings per...
Suppose that all capital gains are taxed at a 30 % ​rate, and that the dividend...
Suppose that all capital gains are taxed at a 30 % ​rate, and that the dividend tax rate is 42 % . Arbuckle Corp. is currently trading for ​$39 ​, and is about to pay a ​$6 special dividend. a. Absent any other trading frictions or​ news, what will its share price be just after the dividend is​ paid? Suppose Arbuckle made a surprise announcement that it would do a share repurchase rather than pay a special dividend. b. What...
1. Stock Values Courageous, Inc. just paid a dividend of $1.80per share on its stock. The...
1. Stock Values Courageous, Inc. just paid a dividend of $1.80per share on its stock. The dividends are expected to grow at a constant rate of 3 percent per year, indefinitely. If investors require a 12 percent return on Courageous stock, what is the current price? What will the price be in 3 years? In 15 years? PART A: Current Price: $____________. PART B: Price in Three Years: $____________. PART C: Price in Fifteen Years: $____________. #4 Stock Values The...
3. Que Corporation pays a regular dividend of $1 per share. Typically, the stock price drops...
3. Que Corporation pays a regular dividend of $1 per share. Typically, the stock price drops by $0.84 per share when the stock goes ex-dividend. Suppose the capital gains tax rate is 18%, but investors pay different tax rates on dividends. Absent transactions costs, what is the highest dividend tax rate of an investor who could gain from trading to capture the dividend?
a. ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually....
a. ABC Company has just paid a dividend of $1.00 per share. Dividends are paid annually. Analysts estimate that dividends per share will grow at a rate of 20% for the next 2 years, at 15% for the subsequent 3 years, and at 3% thereafter. If the shareholders’ required rate of return is 12% per year, then what is the price of the stock today? What will be the ex-dividend price at the end of the first year? What will...
The next dividend payment by Blue Cheese, Inc., will be $1.89 per share. The dividends are...
The next dividend payment by Blue Cheese, Inc., will be $1.89 per share. The dividends are anticipated to maintain a growth rate of 5 percent forever. The stock currently sells for $38 per share. What is the expected capital gains yield? Sample answer format: 2 decimals (unless integer) with NO %. 1.23% will be presented as 1.23 and 2.00% (integer) presented as 2.
Suppose we observe a stock selling at $40 per share. The next dividend will be $1...
Suppose we observe a stock selling at $40 per share. The next dividend will be $1 per share, and you think the dividend will grow at 12 percent per year forever. What is the dividend yield in this case? The capital gains yield?
Suppose you know that a company’s stock currently sells for $70 per share and the required...
Suppose you know that a company’s stock currently sells for $70 per share and the required return on the stock is 15 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT