Which of the Following Is True of the Impact of Tax

question 14

Multiple Choice

Which of the following is true of the impact of tax on dividends?

• A)The immediate tax liability is considerably higher with dividend payments than share repurchases.
• B)When the dividends are paid,the share prices will drop by the amount of tax on dividend.
• C)Double taxation on dividends makes equity a more favourable financing options for firms.
• D)Low dividend taxes cause corporations to rely too much on equity rather than debt financing.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value, helping to determine its worth.

Intangible Benefits

Benefits that cannot be physically touched or quantified easily, such as brand reputation or customer loyalty.

Required Rate Of Return

The minimum percentage return an investor expects to achieve by investing in a particular asset or project.

Tangible Costs

Costs that have a clear and direct physical presence or can be easily measured in monetary terms.