Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Chapter 17.3, Problem 1CC
Summary Introduction
To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of
Introduction:
The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay
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Would would an investor prefer to receive a distribution as a dividend?
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Lower tax rate on dividends than capital gains
Higher tax rate on dividends than capital gains
Greater certainity
Greater uncertainity
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Should a firm pay higher dividend or lower dividend? Support your answer in light of bird in hand, tax effect and other dividend related theories.
Chapter 17 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 17.1 - Prob. 1CCCh. 17.1 - Prob. 2CCCh. 17.2 - Prob. 1CCCh. 17.2 - In a perfect capital market, how important is the...Ch. 17.3 - Prob. 1CCCh. 17.3 - Prob. 2CCCh. 17.4 - Prob. 1CCCh. 17.4 - Prob. 2CCCh. 17.5 - Is there an advantage for a firm to retain its...Ch. 17.5 - Prob. 2CC
Ch. 17.6 - Prob. 1CCCh. 17.6 - Prob. 2CCCh. 17.7 - Prob. 1CCCh. 17.7 - Prob. 2CCCh. 17 - Prob. 1PCh. 17 - ABC Corporation announced that it will pay a...Ch. 17 - Prob. 3PCh. 17 - RFC Corp. has announced a 1 dividend. If RFCs...Ch. 17 - Prob. 5PCh. 17 - KMS Corporation has assets with a market value of...Ch. 17 - Natsam Corporation has 250 million of excess cash....Ch. 17 - Suppose the board of Natsam Corporation decided to...Ch. 17 - Prob. 9PCh. 17 - Suppose BE Press paid dividends at the end of each...Ch. 17 - The HNH Corporation will pay a constant dividend...Ch. 17 - Prob. 12PCh. 17 - Prob. 13PCh. 17 - Prob. 14PCh. 17 - Suppose that all capital gains are taxed at a 25%...Ch. 17 - Prob. 16PCh. 17 - Prob. 17PCh. 17 - Prob. 18PCh. 17 - Prob. 19PCh. 17 - A stock that you know is held by long-term...Ch. 17 - Clovix Corporation has 50 million in cash, 10...Ch. 17 - Assume capital markets are perfect. Kay Industries...Ch. 17 - Redo Problem 22., but assume that Kay must pay a...Ch. 17 - Harris Corporation has 250 million in cash, and...Ch. 17 - Redo Problem 22, but assume the following: a....Ch. 17 - Prob. 26PCh. 17 - Use the data in Table 15.3 to calculate the tax...Ch. 17 - Explain under which conditions an increase in the...Ch. 17 - Why is an announcement of a share repurchase...Ch. 17 - AMC Corporation currently has an enterprise value...Ch. 17 - Prob. 31PCh. 17 - Prob. 32PCh. 17 - Explain why most companies choose to pay stock...Ch. 17 - Prob. 34PCh. 17 - Prob. 35P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- The terms “irrelevance,” “dividend preference”(or “bird-in-the-hand”), and “tax effect” havebeen used to describe three major theoriesregarding the way dividend payouts affect afirm’s value. Explain these terms, and brieflydescribe each theory.arrow_forwardWhat are the factors favoring a high-dividend policy?arrow_forwardWould would an investor prefer to receive a distribution as a repurchase (capital gain)? Answers: Lower tax rate on dividends than capital gains Higher tax rate on dividends than capital gains Greater certainity Greater uncertainityarrow_forward
- Discuss why evaluating vertical equity simply based on tax rate structure may be less than optimal.arrow_forwardHow much in taxes would the target firmhave to pay on any gains it realizes?arrow_forwardWho are the major purchasers of “regular” preferred stock? How do tax considerationsaffect these purchases?arrow_forward
- What is the assumption of the dividend growth model? Comment on the reasonableness for the assumptions of the dividend growth model.arrow_forwardWhat is the investor’s expected after-tax internal rate of return on equity invested (ATIRR)?arrow_forwardWhy is the after-tax cost of debt, rather than its before-taxrequired rate of return, used to calculate the weighted average costof capital?arrow_forward
- Explain what a residual policy implies (assuming that all distributions are in the form of dividends), illustrating your answer with a table showing how different investment opportunities could lead to different dividend payout ratios.arrow_forwardWhat benefits is available to investors in a dividend reinvestment plan? How might the firm benefit?arrow_forwardProfits that have been subjected to IAET will be liable to dividend tax when they are eventually declared as dividends. Is it true or false?arrow_forward
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