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November 20th, 2015, 04:35 AM  #1 
Newbie Joined: Nov 2015 From: Dhaka Posts: 1 Thanks: 0  Can anyone solve this? I have exam tomorrow.
In their 1970 paper on dividends and taxes, elton and gruber reported that exdividend date drop in the stock price as a percentage of the dividend should equal the ratio of one minus the oridnary income tax rate to one minus the capital gains rate; that is 1. i. When To=Tc=0 how much will stock”s price fall? ii. If To =0and Tc=0 how much will it fall ? iii. Explain the resul;t you find (i) and (ii)? iv. Do the result of Elton and Gruber “s stuidy imply that firm”s will maximize shareholder wealth by noy paying dividend? 

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