FIN 516 Week 1 Homework


FIN 516 Week 1 Homework
Problem 17-7 on Ex-dividend Price Based on Chapter 17 Payout Policy
Natsam Corporation has $250 million of excess cash. The firm has no debt and 500 million shares outstanding with a current market price of $15 per share. Natsam’s board has decided to pay out this cash as a one-time dividend.
Problem 17-15 on Distribution to Shareholders Based on Chapter 17 Payout Policy
Suppose that all capital gains are taxed at a 25% rate and that the dividend tax rate is 50%.
Arbuckle Corporation is currently trading for $30 and is about to pay a $6 special dividend.
Problem 17-19 on Dividend Capture Strategy Based on Chapter 17 Payout Policy
Que Corporation pays a regular dividend of $1 per share. Typically, the stock price drops by $0.80 per share when the stock goes ex-dividend. Suppose the capital gains tax rate is 20%, but investors pay different tax rates on dividends.

Absent transactions costs, what is the highest dividend tax rate of an investor who could gain from trading to capture the dividend?
Problem 23-5 on Preferred Stock Based on Chapter 23 Raising Equity Capital

Three years ago, you founded your own company. You invested $100,000 of your money and received 5 million shares of Series A preferred stock. Since then, your company has been through three additional rounds of financing.