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November 20th, 2015, 04:35 AM   #1
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Can anyone solve this? I have exam tomorrow.

In their 1970 paper on dividends and taxes, elton and gruber reported that ex-dividend 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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