As discussed in the text, in the absence of market imperfections and tax effects, we would expect the share price to decline by the amount of the dividend payment when the stock goes ex-dividend. Once we consider the role of taxes, however, this is not necessarily true. One model has been proposed that incorporates tax effects into determining the ex-dividend price: (P0 – PX) / D = (1 – tP) / (1 – tG) Here P0 is the price just before the stock goes ex, PX is the ex-dividend share price, D is the amount of the dividend per share, tP is the relevant marginal personal tax rate on dividends, and tG is the effective marginal tax rate on capital gains. a. If tP = tG = 0, how much will the share price fall when the stock goes ex? D P0 PX b. If tP = 18 percent and tG = 0, how much will the share price fall?

1. alwaysrain irrigation, inc. would like to determine capacity requirements for the next four years. currently, two production lines are in place for making bronze and plastic sprinklers. three types of sprinklers are available in both bronze and plastic: 90-degree nozzle sprinklers, 180-degree nozzle sprinklers, and 360-degree nozzle sprinklers. management has forecast demand for the next four years as follows: both production lines can produce all the different types of nozzles. the bronze machines needed for the bronze sprinklers require two operators and can produce up to 12,000 sprinklers. the plastic injection molding machine needed for the plastic sprinklers requires four operators and can produce up to 200,000 sprinklers. three bronze machines and only one injection molding machine are available. what are the capacity requirements for the next four years? (assume that there is no learning.)