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You Own Shares in Two Different Companies,Ace Holdings,and Beta Inc

Question 25

Multiple Choice

You own shares in two different companies,Ace Holdings,and Beta Inc.Ace Holdings earns $6.00 per share before taxes,has a corporate tax rate of 25%,and pays out 50% of its after-tax earnings as dividends.Beta Inc.earns $4.00 per share before taxes,has a corporate tax rate of 15%,and pays out 100% of its after-tax earnings as dividends.Which company pays you a higher dividend,and by how much?


A) Beta Inc.,by $1.15
B) Beta Inc.,by $1.75
C) Ace Holdings,by $0.15
D) Ace Holdings,by $1.10
E) Ace Holdings,by $2.25

Correct Answer:

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