The tax disadvantage of retained cash in the year 1998. Introduction: Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value , then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains . Usually, the capital gain tax rate is lower than the dividend tax rate.

Question

Want to see the full answer?

Answer 1

Question

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 2

Question

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Answer 6

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

Answer 7

Chapter 17, Problem 27P

a)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1998.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually, the capital gain tax rate is lower than the dividend tax rate.

Answer 8

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Answer 9

b)

Summary Introduction

To calculate: The tax disadvantage of retained cash in the year 1976.

Introduction:

Tax disadvantage of retained cash is a tax disadvantage that a company pays to its shareholders, rather than investing in any projects because they have to pay tax from the amount received from the company. On the other hand, if the company retains its cash and invests in any other project with positive net present value, then the value of the company will increase. This will make the shareholder to pay the tax only on capital gains.

Usually the capital gain tax rate is lower than the dividend tax rate.

Answer 10

Expert Solution & Answer

Answer 11

Expert Solution & Answer

Answer 12

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 13

Ch. 17.1 - Prob. 1CC Ch. 17.1 - Prob. 2CC Ch. 17.2 - Prob. 1CC Ch. 17.2 - In a perfect capital market, how important is the...Ch. 17.3 - Prob. 1CC Ch. 17.3 - Prob. 2CC Ch. 17.4 - Prob. 1CC Ch. 17.4 - Prob. 2CC Ch. 17.5 - Is there an advantage for a firm to retain its...Ch. 17.5 - Prob. 2CC

Want to see the full answer?

Chapter 17 Solutions