Consider Two Corporations, G and H, That Have Exactly the Same

question 42

Multiple Choice

Consider two corporations, G and H, that have exactly the same risk. They both have a current stock price of $60. Corporation G pays no dividend and will have a price of $66 one year from now. Corporation H pays dividends and will have a price of $63 one year from now after payment of a dividend. Corporations pay no income taxes. Investors pay no taxes on capital gains, but they pay a 30% income tax on dividends. What is the value of the dividend that investors expect Corporation G to pay?

• A) $4.29.
• B) $3.00.
• C) $3.15.
• D) $3.30.

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Definitions:

Congress of Racial Equality

An African-American civil rights organization in the United States that played a pivotal role in the fight against segregation and discrimination in the 1940s to 1960s.

Supreme Court

The highest federal court in the United States, with the final authority on constitutional and federal law.

Albany Movement

A major civil rights campaign in the early 1960s, focused on desegregation and voting rights in Albany, Georgia.

Segregationists

Individuals or groups advocating for the separation of people based on racial or other differences, often seen in historical contexts.