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# Consider the three stocks in the following table. Pt represents price at time t, and Qt represents s

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Problem 2-32
at \$32, sells it at year-end at \$32, and receives a \$4 year-end dividend. The
firm is in the 30% tax bracket. (Round your answer to 2 decimal places.)
After-tax rate of return
%
Explanation:
The total before-tax income is \$4. The corporations may exclude 70% of dividends received from domestic corporations in the computation of
their taxable income; the taxable income is therefore: \$4 × 30% = \$1.2.
Income tax in the 30% tax bracket: \$1.2 × 30% = \$0.36
After-tax income = \$4 – \$0.36 = \$3.64
After-tax rate of return = \$3.64/\$32 = 0.1138 or 11.38%
11.38 ± 1%

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