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

question 39

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.
-Which of the following equations is INCORRECT?

• A) P_cum - P_ex = Div ×
• B) P_cum - P_ex = Div ×
• C) =
• D) (P_cum - P_ex)(1 - τ_d) = Div(1 - τ_g)

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Definitions:

Deflation

A decrease in the general price level of goods and services, often indicating an economy in contraction.

Aggregate

A total or sum, often used in economics to describe combined quantities like total output or income.

Frictional Unemployment

represents short-term unemployment that occurs when workers are between jobs or entering the labor force for the first time.

Labor Force

The total number of people employed or actively seeking employment in a country or region.