A dividend policy based on tax issues will call for a dividend when The tax on...
A dividend policy based on tax issues will call for a dividend when
- The tax on ordinary income is greater than the capital gains tax
- The tax on ordinary income is less than the capital gains tax
- The tax on ordinary income is equal to the capital gains tax
- The tax on ordinary income is greater than the company' WACC
- None of the other answer
Homework Answers
The tax on ordinary income is less than the capital gains tax
Explanation:
If capital gain tax rate will be higher then company will pay dividends to save tax expense on capital gain tax.
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A dividend policy based on tax issues will call for a dividend
when
The tax on...
Reynolds Paper Products Corporation follows a strict residual dividend policy. All else equal, which of the...
Reynolds Paper Products Corporation follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in the firm's dividend per share? The firm’s net income increases. The company increases the percentage of equity in its target capital structure. The number of profitable potential projects increases. Congress lowers the tax rate on capital gains. The remainder of the tax code is not changed. Earnings are unchanged, but the firm...
Given the following: Corporate tax rate 40%; Dividend/Capital Gains tax rate: 15%; Ordinary income tax rate...
Given the following: Corporate tax rate 40%; Dividend/Capital Gains tax rate: 15%; Ordinary income tax rate 35%. Our company decides to issue incremental debt in order to increase our interest expense by $25 million annually. How much will debt holders receive after all applicable taxes are paid? How much will the company need to reduce its dividend in order to pay the additional interest expense? How much will the dividend cut reduce shareholder after-tax annual income? How much more or...
Given the following: Corporate tax rate 40%; Dividend/Capital Gains tax rate: 15%; Ordinary income tax rate...
Given the following: Corporate tax rate 40%; Dividend/Capital Gains tax rate: 15%; Ordinary income tax rate 35%. Our company decides to issue incremental debt in order to increase our interest expense by $25 million annually. How much will debt holders receive after all applicable taxes are paid? How much will the company need to reduce its dividend in order to pay the additional interest expense? How much will the dividend cut reduce shareholder after-tax annual income? How much more or...
Given the following: Corporate tax rate 40%; Dividend/Capital Gains tax rate: 15%; Ordinary income tax rate...
Given the following: Corporate tax rate 40%; Dividend/Capital Gains tax rate: 15%; Ordinary income tax rate 35%. Our company decides to issue incremental debt in order to increase our interest expense by $25 million annually. How much will debt holders receive after all applicable taxes are paid? How much will the company need to reduce its dividend in order to pay the additional interest expense? How much will the dividend cut reduce shareholder after-tax annual income? How much more or...
The residual dividend policy approach to dividend policy is based on the theory that a firm's...
The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Red Bison Petroleum Producers Corporation: Red Bison Petroleum Producers Corporation is expected to generate $140,000,000 in net income over the next year. Red...
The residual dividend policy approach to dividend policy is based on the theory that a firm's...
The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Purple Hedgehog Forestry Group: Purple Hedgehog Forestry Group is expected to generate $240,000,000 in net income over the next year. Purple Hedgehog Forestry...
The residual dividend policy approach to dividend policy is based on the theory that a firm’s...
The residual dividend policy approach to dividend policy is
based on the theory that a firm’s optimal dividend distribution
policy is a function of the firm’s target capital structure, the
investment opportunities available to the firm, and the
availability and cost of external capital. The firm makes
distributions based on the residual earnings.
Consider the case of Red Bison Petroleum Producers Group:
Red Bison Petroleum Producers Group is expected to generate
$140,000,000 in net income over the next year. Red...
The residual dividend policy approach to dividend policy is based on the theory that a firm's...
The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Red Bison Petroleum Producers Inc.: Red Bison Petroleum Producers Inc. has generated earnings of $180,000,000. Its target capital structure consists of 60% equity...
Your firm follows a strict residual dividend policy. All else equal, which of the following factors...
Your firm follows a strict residual dividend policy. All else equal, which of the following factors would be most likely to lead to an increase in your firm's dividend per share? The company reduces the percentage of debt in its target capital structure. The number of profitable potential projects increases. Congress lowers the tax rate on capital gains. Earnings are unchanged, but the firm buys back shares of common stock. The firm's net income decreases.
CH 14:3. The residual dividend modelThe residual dividend policy approach to dividend policy is...
CH 14:3. The residual dividend modelThe residual dividend policy approach to dividend policy is based on the theory that a firm’s optimal dividend distribution policy is a function of the firm’s target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings.Consider the case of Purple Hedgehog Forestry Group:Purple Hedgehog Forestry Group has generated earnings of $240,000,000. Its target capital structure consists of 60%...
The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Red Bison Petroleum Producers Corporation: Red Bison Petroleum Producers Corporation is expected to generate $140,000,000 in net income over the next year. Red...
The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Purple Hedgehog Forestry Group: Purple Hedgehog Forestry Group is expected to generate $240,000,000 in net income over the next year. Purple Hedgehog Forestry...
The residual dividend policy approach to dividend policy is based on the theory that a firm's optimal dividend distribution policy is a function of the firm's target capital structure, the investment opportunities available to the firm, and the availability and cost of external capital. The firm makes distributions based on the residual earnings. Consider the case of Red Bison Petroleum Producers Inc.: Red Bison Petroleum Producers Inc. has generated earnings of $180,000,000. Its target capital structure consists of 60% equity...
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