How would each of the following changes tend to affect the average dividend payout ratios for corporations, other things held constant? Explain your answers. a. An increase in the personal income tax rate b. A liberalization of depredation for federal income tax purposes—that is, faster tax write-offs c. A rise in interest rates d. An increase in corporate profits e. A decline in corporate investment opportunities f. Permission for corporations to deduct dividends for tax purposes as they now can do with interest charges g. A change in the tax code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividends
How would each of the following changes tend to affect the average dividend payout ratios for corporations, other things held constant? Explain your answers. a. An increase in the personal income tax rate b. A liberalization of depredation for federal income tax purposes—that is, faster tax write-offs c. A rise in interest rates d. An increase in corporate profits e. A decline in corporate investment opportunities f. Permission for corporations to deduct dividends for tax purposes as they now can do with interest charges g. A change in the tax code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividends
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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How would each of the following changes tend to affect the average dividend payout ratios for corporations, other things held constant? Explain your answers.
a. An increase in the personal income tax rate
b. A liberalization of depredation for federal income tax purposes—that is, faster tax write-offs
c. A rise in interest rates d. An increase in corporate profits
e. A decline in corporate investment opportunities
f. Permission for corporations to deduct dividends for tax purposes as they now can do with interest charges
g. A change in the tax code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividends
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