Which One of the Following Would Tend to Favor a Low-Dividend

question 31

Multiple Choice

Which one of the following would tend to favor a low-dividend payout?

• A)Higher tax rates on capital gains than on dividend income
• B)High flotation cost for equity issues
• C)Endowment fund investors who cannot spend principal
• D)Investors' desire for a high-dividend yield
• E)Elimination of the tax deferral on capital gains

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Definitions:

Disposable Income

Post-tax financial resources available for household spending and savings.

Savings

The portion of income that is not spent on consumption or taxes, typically put aside for future use or investments.

Disposable Income

Income available for spending and saving after income taxes have been accounted for.

C + I

An economic formula representing consumer spending (C) plus investment spending (I), components of a country's GDP calculation.