Use the Following Information to Answer the Question(s)below

question 18

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that all capital gains are taxed at a 20% rate,and that the dividend tax rate is 40%.Rearden Metal is currently trading for $40 per share,and is about to pay a $5 special dividend.
-Absent any other trading frictions or news,Rearden's share price just after the dividend is paid will be closest to:

• A)$35.
• B)$36.
• C)$37.
• D)$40.

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Definitions:

Marginal Product

The additional output generated by employing one more unit of a specific factor of production, holding other inputs constant.

Yards Raked

The measure of area covered or cleaned by raking leaves or debris, often used as an example of physical labor or service provided.

Average Product

The output per unit of a particular input, calculated by dividing total product by the quantity of that input.

Marginal Product

The increase in output that arises from an additional unit of input.