Suppose That the Pre-Tax Holding Period Returns on Two Stocks

question 5

Multiple Choice

Suppose that the pre-tax holding period returns on two stocks are the same. Stock A has a high dividend-payout policy and stock B has a low dividend-payout policy. If you are an individual in a high marginal tax bracket and do not intend to sell the stocks during the holding period,

• A) stock A will have a higher after-tax holding period return than stock B.
• B) the after-tax holding period returns on stocks A and B will be the same.
• C) stock B will have a higher after-tax holding period return than stock A.
• D) it is impossible to determine which stock will have a higher after-tax holding period return given the information available.

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Definitions:

Lifetime Value

The total revenue a business can expect from a single customer throughout the duration of their relationship.

Customer Equity

The total combined customer lifetime values of all the company’s customers, representing the financial value of the customer base.

Customer Service Strategy

A plan designed to improve how a business interacts with its customers, aiming to enhance satisfaction and loyalty.

Order Cycle

The sequence of events from the moment a customer places an order to the delivery of the product or service.