Find what are the expected net percentage returns

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The expected pretax return on three stocks is divided between dividends and capital gains in the following way:

                 Expected                Expected
           Stock Dividend           Capital Gain

A             $ 0                              $ 10
B                  5                               5
C                  10                              0

Required:

Question a. If each stock is priced at $170, what are the expected net percentage returns on each stock to (i) a pension fund that does not pay taxes, (ii) a corporation paying tax at 21% (the effective tax rate on dividends received by corporations is 6.3%), and (iii) an individual with an effective tax rate of 15% on dividends and 10% on capital gains?

Reference no: EM132578789

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