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What is the implied tax rate on capital gains

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Reference no: EM132428731

Problem: The current stock price of a company is $100 a share. This company announces a dividend of $5 a share. On ex-dividend day the stock price drops $4 to $96 a share. If the tax rate on dividends, τD, is 30%, what is the implied tax rate on capital gains, τG?

You are a tax-exempt institution, and you plan to sell 100 shares (that you already own) of this stock; would you sell them cum- or ex-dividend?

Reference no: EM132428731

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