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

question 35

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.
-Consider the following equation: P_cum - P_ex = Div × The term τ_g is:

• A) the personal tax rate for dividend.
• B) the personal tax rate for capital gains.
• C) the price per share before a dividend is paid.
• D) the price per share after a dividend is paid.

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Definitions:

Cyclohexyl Bromide

An organic compound consisting of a cyclohexane ring substituted with a bromine atom, commonly used in organic synthesis.

(S)-2-Iodopentane

A chiral compound characterized by having the S configuration at the chiral center, with a pentane backbone and an iodine substituent at the second position.

KCN

Potassium cyanide, a compound that contains a highly toxic cyanide ion (CN-) and is used in various industrial processes and in some chemical syntheses.

DMF

Dimethylformamide; an organic compound used as a solvent with a high boiling point.