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How would each of the following changes tend to affect aggregate (i.e., the average for all corporations) payout ratios, other things held constant? Explain your answers. a. An increase in the personal income tax rate b. A liberalization of depreciation for federal income tax purposes–that is, faster lax write-offs c. An increase in interest rates d. An increase in corporate profits e. A decline in investment opportunities f. Permission for corporations to deduct dividends for tax purposes as they now deduct interest expense g. A change in the Tax Code so that realized and unrealized long-term capital gains in any year are taxed at the same rate as ordinary income

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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

Solutions

Chapter
Section
Chapter 14, Problem 5Q
Textbook Problem

How would each of the following changes tend to affect aggregate (i.e., the average for all corporations) payout ratios, other things held constant? Explain your answers.

  1. a. An increase in the personal income tax rate
  2. b. A liberalization of depreciation for federal income tax purposes–that is, faster lax write-offs
  3. c. An increase in interest rates
  4. d. An increase in corporate profits
  5. e. A decline in investment opportunities
  6. f. Permission for corporations to deduct dividends for tax purposes as they now deduct interest expense
  7. g. A change in the Tax Code so that realized and unrealized long-term capital gains in any year are taxed at the same rate as ordinary income

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