Which One of the Following Is an Argument in Favor

question 71

Multiple Choice

Which one of the following is an argument in favor of a low dividend policy?

• A) The tax on capital gains is deferred until the gain is realized.
• B) Few, if any, positive net present value projects are available to the firm.
• C) A preponderance of stockholders have minimal taxable income.
• D) A majority of stockholders have other investment opportunities that offer higher rewards with similar risk characteristics.
• E) Corporate tax rates exceed personal tax rates.

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Definitions:

Allocation Percentage

The portion of an investment portfolio or fund dedicated to a specific asset class, sector, or individual security, usually expressed as a percentage.

IPO Offering

Initial Public Offering, which is when a company first sells shares to the public to raise capital.

Economic Profits

The surplus after all operating costs, including the cost of capital, are subtracted from revenue, indicating the value created beyond the required return.

Seed Money

Initial funding used to start a business or a new venture, often provided by angel investors or venture capitalists.