Assume that the tax on dividends and the tax on capital gains is the same. All else equal, what would a prudent investor prefer? A. More information is needed. B. The prudent investor would prefer dividends—a dollar today is always worth more than a dollar to be received in the future. C. The prudent investor would be indifferent between receiving dividends or capital gains. D. The prudent investor would prefer capital gains—the capital gain tax liability can be deferred until gains are realized.

Q: What tax treatment do individual investors generally prefer in stock redemptions? Why?

A: Under the process of stock redemption, entire redemption amount is considered as the part of taxable…

Q: why are equities regarded as riskier than debentures for investor? a) because they are paid first…

A: Equity means ownership or stake in a company through holding of shares of that company. It is also…

Q: Which one of the following is not a characteristic of Modigliani-Miller Propositions with corporate…

A: MM proposition with tax: if tax is allowed, the firm increases its value with introducing debt…

Q: what type of risk?

A: Factors or risk that affect the entire market is known as Systematic Risk. Changes in interest rate…

Q: 23

A: Demand-side economics emphasizes the importance of consumer spending and aggregate demand as the…

Q: Is it because: a. The capital gain will be different because the dividend did not change. or…

A: Capital gain can be calculated s follows: Capital gain=(Sale price - Cost price)Cost price* 100

Q: A Higher business tax will (Please select the best choice) (A) increase inflation (B) decrease…

A: Inflation refers to the rise in price levels of products or services. It generally happens if the…

Q: Why might the after-tax internal rate of return on equity (ATIRRe) differ for a new investor versus…

A: A post-tax IRR for equity could shift for another financial specialist versus a current speculator…

Q: None

A: Step 1: Introduction to the Capital Gain:If a physical or virtual asset is held for a period of time…

Q: Under the equity method, the investor

A: Investment shows the amount provided in a project or securities with the expectation of something in…

Q: Explain Why you agree or disagree with the following statement. The answer should not be more than 3…

A: The MM theory helps to understand the impact of different sources of capital and the tax rates on…

Q: Two considerations that cause a corporation's cost of capital to be different than its investors'…

A: Cost of capital of a company is the weighted average cost of different sources of capital like…

Q: But capital gains may be tax-advantaged for some investors. Therefore, tInterest = tDividends but,…

A: The Imputation system implies that firm income distributed as dividend effectively taxes at the…

Q: How much in taxes would the target firmhave to pay on any gains it realizes?

A: Corporate taxes are calculated on the gross profits after the expenses have been deducted from the…

Q: If some activity creates positive externalities as well as private benefits, then economic theory…

A: An externality is benefit or cost that affects someone who is not directly involved in the…

Q: Would would an investor prefer to receive a distribution as a dividend?     Answers: Lower tax…

A: Dividend is a proportion of profit which is paid to shareholders when company has ample of funds.…

Q: Mr. Adnan age 28 years is an Indian citizen who is working for PDO. Mr. Adnan is seeking for…

A: An investor is defined by three major characteristics, safety, income, and growth of capital.

Q: True or False An increase in the capital gains tax rate decreases the total amount of unrealized…

A: capital gains:- A capital gain is an increase in the value of a capital asset that is realized when…

Q: Tax System Best thing about it Worst thing about it Flat (Proportional) Progressive Consumption/…

A: Flat and Progressive tax is a direct tax while as Regressive (Consumption) is the indirect tax.

Q: II. How Sin taxes help the health of the people?

A: II.  Sin tax are imposed on the goods which are harmful for health ( such as alcohol, tobacco etc. )…

Q: Which of the following statements under the classical tax system is correct? Multiple Choice…

A: The people who have higher tax rates would always prefer capital appreciation which would result in…

Q: If the corporate income tax rate were to increase, then the use of debt will become more desirable…

A: Capital structure can be defined as the mixture of different capital sources. Capital sources can be…

Q: hort term capital gains taxes are higher than long term capital gains taxes. How does the different…

A: At the point when you sell a capital resource for more than you paid for it, the outcome is a…

Q: A municipal bond carries a coupon rate of 4.25% and is trading at par. What would be the equivalent…

A: A bond indicates a debt instrument that obligates the issuer to pay the par value at the expiration…

Q: Do you think with the technological advances we now have there should be little to no tax errors?…

A: introduction Yes,  I think with the technological advances we now have there should be little to no…

Q: If you could freeze your wealth to reduce the tax on your death but not affect your income, would…

A: When it comes to taxes, the term "frozen" usually describes a scenario in which an asset's worth is…

Q: Explain the concept of Tax Deduction in WACC. Does this tax deduction make debt finance Cheaper Then…

A: WACC is the weighted average cost of equity, cost of debt and cost of preference capital.

Q: The "at-risk" rule acts to prevent tax shelters from generating large losses for their investors…

A: "At-risk" rules are the tax shelter laws that limits the entity's amount to claim deductions which…

Q: Under the equity method, the investor must debit the Equity Investments account when a dividend is…

A: Equity method is used by the investor company when the percentage of investment in the common stock…

Q: B. State whether each of the following statements is true or false, and briefly explain why. (i) In…

A: Dividend The part of the profit that is distributed to the shareholders by the company is known as…

Q: Select all that is not true about capital structure theory (MM theory). (2 answers)       Under…

A: As per MM hypothesis 1, there are no corporate taxes. This hypothesis states that the level of debt…

Q: ntion that in the absence of the tax advantages of debt the use of gearing can increase the expected…

A: The use of debt is very common in organization because the debt had the tax advantages due to which…

Q: You would rather have a tax deduction thana tax credit of equal size. Ture False A large tax refund…

A: FALSE Tax Credits and Tax Deductions both help in reducing the amount of income tax to be paid by a…

Q: . Use the criteria of equity and efficiency in taxation to evaluate the idea of taxing capital gains…

A: Taxing capital gain: There are fives sources of income recognized by the tax authorities on which…

Q: Why do you think the Tax Reform Act of 1986 affected the desirability of investing in real estate…

A: The question is based on the impact of tax reform on long term investment in real estate.

Q: When we take taxes into account, MM's 1958 Proposition could no longer hold, and the capital…

A: M&M theory states that the capital structure of a company does not have affect in its overall…

Q: You are in a high tax bracket and would like to minimize the tax burden of  investment portfolio.…

A: Any profit or gain which results from the sale of a Capital asset is known as a capital gain.…