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What are the before-tax cost and after tax cost

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Reference no: EM133068535

Question - The ordinary shares of CLTE Ltd are currently being traded at $60. A dividend of $8 was paid last week and the next dividend is due a year from now. CLTE Ltd pays fully franked dividend and faces a 30% corporate tax rate. The dividend of CLTE Ltd is expected to grow at 25%. What are the before-tax cost and after tax cost of retained earnings for CLTE Ltd respectively.

a. 41.67%; 48.8%

b. 48.8%; 41.67%

c. 23.8%; 16.6%

d. 0.488%; 0.416%

Reference no: EM133068535

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