If there is taxes for capital and dividends then it’s the second one if there isn’t then it’s just dividend. Most questions assume we’re in a perfect world so no taxes on both
A more intuitive approach will be that an investor is indifferent between a stock paying dividend or one that does not because receiving dividend will result in decrease in stock price. This means that after tax capital gains = after tax gains on dividends.
That’s what I have been arguing all along….somewhere here I claimed that 40% of the formulas in the CFAI books can easily be derived, some are too obvious to worry about, and a few you have to memorize
By the amount of the dividend if Td=Tcg, which I believe is the case since 2003 in the U.S.
I tried a more intuitive formula for this, but didn’t find one.
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If there is taxes for capital and dividends then it’s the second one if there isn’t then it’s just dividend. Most questions assume we’re in a perfect world so no taxes on both
Studying With
A more intuitive approach will be that an investor is indifferent between a stock paying dividend or one that does not because receiving dividend will result in decrease in stock price. This means that after tax capital gains = after tax gains on dividends.
Thus,
(1 - Td) * dividend = (1 - Tc) * change in stock price
and
change in stock price = (1 - Td) * dividend / (1 - Tc)
g3r41d, that’s cool.
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Thanks! I can’t really memorise formulas, thus will need to better understand how the formulas work so I can derive them.
That’s what I have been arguing all along….somewhere here I claimed that 40% of the formulas in the CFAI books can easily be derived, some are too obvious to worry about, and a few you have to memorize