Which One of the Following Favors a Low Dividend Policy

question 61

Multiple Choice

Which one of the following favors 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 a firm
• C)a majority of the shareholders has a low relevant tax rate
• D)a majority of the shareholders has better investment opportunities with similar risks
• E)corporate tax rates exceed personal tax rates

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Definitions:

Controlling Interest

Controlling interest is a situation in which an investor, entity, or group of entities owns enough shares to dictate the company's policies and direction through voting power.

Ownership Structure

The way in which a company is owned and organized, detailing the distribution of shareholder and stakeholder interests.

Subsidiary

An entity that is controlled by another entity.

Sequential Acquisition

An acquisition in which the ultimate parent acquires its shares in the immediate parent before the immediate parent acquires its shares in the ultimate subsidiary, or both acquisitions occur on the same date.