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

question 25

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 P_cum is:

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

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Definitions:

Ethane

A colorless, odorless gas with the formula C2H6, used as a fuel and as a feedstock for the production of chemicals.

Octane

A hydrocarbon with the chemical formula C8H18, commonly used as a reference standard in determining the quality of gasoline fuels.

Propane

A flammable hydrocarbon gas that is a component of natural gas, commonly used as fuel.

Condensed Structural Formula

A method of representing the molecular structure of a chemical compound where bonds and atoms are shown using symbols without depicting the actual bond angles or lengths.