QC 18. The HNH Corporation will pay a constant dividend of $5.00 per share, per...
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QC 18. The HNH Corporation will pay a constant dividend of $5.00 per share, per year, in perpetuity. Assume all investors pay a 15% tax on divi- dends and that there is no capital gains tax. Suppose the other investments with equivalent risk to HNH stock offer an after-tax return of 14%. a. What is the price of a share of HNH stock? b. Assume that management makes a surprise announcement that HNH will no longer pay dividends but will use the cash to repurchase stock instead. What is the price of a share of HNH stock now
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