What is the net tax savings per share for an investor

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Reference no: EM133492514

Case: Suppose that all capital gains are taxed at a 25% rate, and that the dividend tax rate is 45%. Orchid Metal is currently trading for $45 per share, and is about to pay a $9 special dividend.

Question 1: What is the effective dividend tax rate for an investor in Orchid Metal?

Absent any other trading frictions or news, calculate the Orchid's share price just after the dividend is paid. Show all calculations

Question 2: Suppose that Orchid Metal made a surprise announcement that it would share repurchase rather than pay a special dividend, what is the net tax savings per share for an investor that would result from this decision?

Reference no: EM133492514

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