Multiple Choice
Two corporations A and B have exactly the same risk, and both have a current stock price of $100. Corporation A pays no dividend and will have a price of $120 one year from now. Corporation B pays dividends and will have a price of $113 one year from now after paying the dividend. The corporations pay no taxes and investors pay no taxes on capital gains, but pay a 30 percent income tax on dividends. What is the value of the dividend that investors expect corporation B to pay one year from today?
A) $7
B) $13
C) $10
D) $20
Correct Answer:
Verified
Correct Answer:
Verified
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