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How much will stock price change

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Your firm will pay a dividend of $5.70 per share in perpetuity. The shareholders in your firm have a dividend tax rate of 40 percent. The tax rate on capital gains is 15 percent. The required rate of return on the company's stock is 11.3 percent compounded annually. Your firm has announced that it will no longer pay a dividend but will use the cash to repurchase shares. By how much will stock price change?

Reference no: EM132546355

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