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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