Divident tax and growth tax equal

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Reference no: EM132207233

Tax differential theory: a method of valuing shares with constant growth to DI/P0 Xg An investor is faced with 2 investment choices: First choice of shares with market price(po)=Rp1000 million, first year ddivident (DI)=12% and growth rate(g)=3%.

Second option, share with market price(po) Rp=1000 million. First year divident (DI)=4% and growth rate of 11% the shares will only be held for one year. Brothers are asked to choose investments in the first or second share

When (a) Divident tax and growth tax equal to 25%, (b) Divident tax of 25% while tax growth is 20%, (c) 20% divident tax while 25% growth tax

Reference no: EM132207233

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