Business, 27.04.2021 16:10, Goldenstate32
The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have different dividend policies. Gecko pays no dividend, whereas Gordon has an expected dividend yield of 6 percent. Suppose the capital gains tax rate is zero, whereas the income tax rate is 40 percent. Gecko has an expected earnings growth rate of 10 percent annually, and its stock price is expected to grow at this same rate.
Required:
If the aftertax expected returns on the two stocks are equal (because they are in the same risk class), what is the pretax required return on Gordon’s stock?
Answers: 2
Other questions on the subject: Business
Business, 23.06.2019 01:40, Dede6308
Which of the following statements is incorrect? select one: a. personal creditors have first claim on partnership assets. b. partnerships are subject to dual taxation. c. no law requires partners to create a written partnership agreement, but it's smart to do so. d. partnership has limited life and unlimited liability.
Answers: 3
Business, 23.06.2019 04:40, blakemccain1928
What are the advantages and disadvantages for an individual who accepts a job as a human resource manager in a firm that is in the midst of a retrenchment corporate strategy? a reactor business strategy?
Answers: 3
Do you know the correct answer?
The Gecko Company and the Gordon Company are two firms whose business risk is the same but that have...
Questions in other subjects:
