How much does the market value the associated

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Reference no: EM133633058

Question: You are examining the dividend strategies of three dividend-paying companies in Australia, where the company tax rate is 30%. You have gathered the following data on the ex-dividend behaviour of these firms.

HG Hydro	BY Gas	HP Energy
Cum-dividend price	60	72	100
Ex-dividend price	56	68.5	95
Fully franked Dividends per share	3	3	5

a) What are the associated franking credits for three companies at the given franked dividends?

b) How much does the market value the associated franking credits (a.k.a. γ, keeping two digits, eg. 0.45)?

c) If you were a tax-exempt Australian domestic investor, which company would you use to make dividend arbitrage profits? How would you go about doing so?

Reference no: EM133633058

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