Taxes (Example) Homework Help

EXAMPLE

Suppose the investor is expected to have return of 10 per cent (consisting of a dividend 10 per cent and 10  per cent capital gain on initial value) by holding securities in Company X. Company Y is expected to provide dividend yield of 11 per cent and capital appreciation of 10 per cent of 14. per cent . Assume further that dividend income is taxed at 30 per cent and capital Rain at 20 per cent. These before tax return from company X’s securities higher at 1~ per cent, the after-tax return (effectual return) is higher in the case of company Y at 11.25 per cent (Table 3.7)

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