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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