Business, 24.06.2019 21:50 tordoor7182

Assume capital markets are perfect. kay industries currently has $200 million invested in short-term treasury securities paying 8 %, and it pays out the interest payments on these securities as a dividend. the board is considering selling the treasury securities and paying out the proceeds as a one-time dividend payment. assume investors pay a 15 % tax on dividends and capital gains, and a 40 % tax on interest income, while kay pays a 40% corporate tax rate. a. if the board went ahead with this plan, what would happen to the value of kay stock upon the announcement of a change in policy? b. what would happen to the value of kay stock on the ex-dividend date of the one-time dividend? c. given these price reactions, will this decision benefit investors? a. if the board went ahead with this plan, what would happen to the value of kay stock upon the announcement of a change in policy? assume that investors pay a 15 % tax on dividends and capital gains, and a 40 % tax on interest income, while kay pays a 40% corporate tax rate. if the board went ahead with this plan, the equity value of kay would go ▼ up down by $ nothing million on announcement. (select from the drop-down menu and round to the nearest integer.)b. what would happen to the value of kay stock on the ex-dividend date of the one-time dividend? (select the best choice below.)a. the value of kay would remain the same. b. the value of kay would fall by $ 200 minus $ 200 times 15 % equals $ 170$200−$200×15%=$170 million. c. the value of kay would rise by $ 200$200 million. d. the value of kay would fall by $ 200$200 million. c. given these price reactions, will this decision benefit investors? (select the best choice below.)a. it will benefit investors. b. it's difficult to tell because the price reaction depends on investor preferences. c. it will hurt investors. d. it will neither benefit nor hurt investors. click to select your answer(s).

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