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31.If investors do not like dividends because of the additional

Question : 31.If investors do not like dividends because of the additional : 1409499

 

31.If investors do not like dividends because of the additional taxes that they have to pay, how would you expect stock prices to behave on the ex-dividend date? 
 
 

A. Fall by more than the amount of the dividend

B. Fall exactly by the amount of the dividend

C. Fall by less than the amount of the dividend

D. Cannot be predicted

32.Even if both dividends and capital gains are taxed at the same ordinary income tax rate, the effect of each type of tax is different because: 
 
 

A. capital gains are actually taxed, while dividends are taxed on paper only.

B. dividends are taxed when distributed, while capital gains are deferred until the stock is sold.

C. both dividends and capital gains are taxed every year.

D. both A and C.

33.If dividends are taxed more heavily than capital gains, then investors: 
 
 

A. should be willing to pay more for stocks with low dividend yields.

B. should be willing to pay more for stocks with high dividend yields.

C. should be willing to pay the same for stocks regardless of their dividend yields.

D. should be willing to pay more for stocks having infrequent share repurchases.

34.Consider the payout policies of U.S. firms from 2001-2010. Which category had the highest percentage of firms? 
 
 

A. Firms that paid dividends and repurchased shares

B. Firms that paid dividends but did not repurchase shares

C. Firms that paid no dividends but did repurchase shares

D. Firms that paid no dividends and did not repurchase shares

35.Two corporations A and B have exactly the same risk, and both have a current stock price of $100. Corporation A pays no dividend and will have a price of $120 one year from now. Corporation B pays dividends and will have a price of $113 one year from now after paying the dividend. The corporations pay no taxes and investors pay no taxes on capital gains, but pay a 30% income on dividends. What is the value of the dividend that investors expect corporation B to pay one year from today? 
 
 

A. $7

B. $13

C. $10

D. $20

36.Which of the following investors has the strongest tax reason to prefer dividends over capital gains? 
 
 

A. pension funds

B. financial institutions

C. individuals

D. corporations

37.If the corporate tax rate is 35%, what is the maximum effective tax rate on dividends received by another corporation? 
 
 

A. 35%

B. 30%

C. 10.5%

D. 65%

70% of dividends received by another corporation is tax-exempt. Tax rate = (0.3) × (0.35) = 0.105 = 10.5%.

38.According to the middle-of-the-roaders, a firm's value is not affected by its dividend policy because:

I) of the clientele effect;
II) of the tax loopholes available to wealthy stockholders;
III) well-managed companies prefer to signal their worth by paying high dividends 
 
 

A. I only

B. II only

C. III only

D. I, II, and III

39.A firm in Australia earns a pretax profit of $A10 per share. Suppose that it pays a corporate tax of $3 per share (30% tax rate) in taxes. The firm pays the remaining $A7 in dividends to a shareholder in the 30% marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax system? 
 
 

A. $A 2.10

B. $A 0.00

C. $A3.00

D. $A 5.10

40.A firm in Australia earns a pretax profit of $A10 per share. Suppose that it pays a corporate tax of $3 per share (30% tax rate) in taxes. The firm pays the remaining $A7 in dividends to a shareholder in the 40% marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax system? 
 
 

A. $A1.00

B. $0.00

C. $A4.00

D. $A5.80

41.What would best explain the reluctance of General Motors to eliminate its dividend in 2008, only a few months before its financial collapse and eventual government takeover? 
 
 

A. clientele effect

B. leftist theory

C. unwillingness to initiate a share repurchase program

D. expectations of tax law changes

 

 

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