For Valuation Purposes, the Calculation of the Equity Cost of Capital

question 70

Multiple Choice

For valuation purposes, the calculation of the equity cost of capital under an imputation systemshould be reduced by a factor representing, in broad terms

• A) the proportion of taxes collected from the firm that will be rebated against the personal tax in the hands of shareholders.
• B) the proportion of taxes collected from the firm that will be included in the taxable income in the hands of the shareholders.
• C) the proportion of taxes paid by individual shareholders that the firm will compensate through the payment of franking credits.
• D) the franking credits available to shareholders of the firm, weighted against the likelihood that the firm will pay a franked dividend to shareholders.

---

Definitions:

Cystic Fibrosis

A genetic disorder that affects the lungs and digestive system, causing severe damage to the respiratory and digestive systems due to thick, sticky mucus.

Recessive Gene

A gene that produces its characteristic phenotype only when its allele is identical and partnered with another recessive gene.

Respiratory Infections

Infections that affect the lungs, throat, airways, or sinuses, often leading to breathing difficulties and other symptoms.

Sickle-Cell Anemia

A genetic blood disorder causing red blood cells to assume a sickle shape, leading to blockages in blood flow and various complications.