Asked by Brittany Mckinster on Jul 02, 2024
Verified
Which one of the following is an argument in favor of a low dividend policy?
A) The tax on capital gains is deferred until the gain is realized.
B) Few, if any, positive net present value projects are available to the firm.
C) A preponderance of stockholders have minimal taxable income.
D) A majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristics.
E) Corporate tax rates exceed personal tax rates.
Low Dividend Policy
A corporate strategy involving the paying out of a small portion of a company’s earnings in the form of dividends, while retaining the majority to reinvest in the business.
Tax Deferred
Financial arrangements where investment gains such as interest, dividends, or capital gains accumulate tax free until the investor takes constructive receipt of the gains.
Net Present Value
The difference between the current value of cash inflows and the current value of cash outflows over a period of time.
- Assess the advantages and drawbacks of high vs. low dividend policies.
Verified Answer
Learning Objectives
- Assess the advantages and drawbacks of high vs. low dividend policies.
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