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What are the expected net percentage returns on each stock

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Reference no: EM132933186

The expected pretax return on three stocks is divided between dividends and capital gains in the following way:

expected            dividend / capital gain

STOCK A:          $0                $10

STOCK B:           $ 5              $ 5

STOCK C            $10            $10

Required:

Problem a. If each stock is priced at $150, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?

Reference no: EM132933186

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