Determine the current prices of firm as and firm bs shares

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Question - The shares of Firm A and Firm B have identical risk. Both have an after-tax required rate of return of 15 per cent. Firm A pays no dividend, while Firm B is a high dividend paying firm. The price of Firm A's share is expected to be '60 after one year and the price of Firm B '50 with '10 dividend per share. Assume that the income tax rate is 40 per cent and capital gain tax rate is 20 per cent. Determine the current prices of Firm A's and Firm B's shares.

Reference no: EM133155483

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