Asked by Cristina Valadez on Apr 28, 2024
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Suppose the personal tax rate on dividend income increases. All else equal, one would expect the cost of equity for high-dividend firms to decrease.
Personal Tax Rate
The percentage at which an individual is taxed on their income, which can vary based on the income level and the country's tax laws.
Dividend Income
Income from dividends, which are payments made by a corporation to its shareholder members. It is often derived from the company's profits.
Cost of Equity
The rate of return that a company must offer investors to compensate for the risk of investing in its equity.
- Explore the implications of taxation on dividend preferences and policy choices.
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Learning Objectives
- Explore the implications of taxation on dividend preferences and policy choices.
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