This paper circulates around the core theme of FNCE 370 – Suppose we have two equally risky firms, Firm A and B. Firm Bâs shares together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
Suppose we have two equally risky firms, Firm A and B. Firm Bâs shares are currently worth $100, and they are expected to be worth $120 in one year. Personal dividend tax rate is 30%, and capital gains are exempt from taxes. (10 marks)What is the after-tax return on Firm B?If Firm A opts to pay a dividend of $20 per share in one year, what is the after-tax return on Firm A?Given that dividends will reduce firm value proportionally, what is the share price of Firm Aâs stock if it pays a dividend of $20 in one year?
