Dividends and Taxes. Good Values Inc. is all-equity financed. The total market value of the firm

QUESTION

Dividends and Taxes. Good Values, Inc., is all-equity financed. The total market value of the firm currently is $100,000 and there are 2,000 shares outstanding.a. The firm has declared a $5 per share dividend. The stock will go -dividend tomorrow. At what price will be the stock sell today? Ignore taxes.b. Now assume that the federal marginal tax; rate is 26 percent and the provincial marginal tax rate is 13.39 percent, the federal dividend tax credit is 13.33 percent of the grossed-up dividend, and the provincial dividend lax credit is 5.1 percent of grossed-up dividend. The applicable gross-up for dividend tax credits is 25 percent. What is the dividend tax rate?c. Using your result for the dividend tax rate from part (b) and assuming a capital gains tax rate of zero. at what price will the stock sell today?

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