Tax Advantage of Dividend: Investor got the tax advantage of tax when capital gain tax and dividend tax rate are same or capital gain rate is more than the dividend rate . The investor is tax disadvantaged when dividend income is taxed at a higher rate than the capital gains tax rates. To determine: Dividend is tax disadvantaged or not for investors with one-year investment horizon.

Question

Want to see the full answer?

Answer 1

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 17, Problem 11P

Summary Introduction

Tax Advantage of Dividend: Investor got the tax advantage of tax when capital gain tax and dividend tax rate are same or capital gain rate is more than the dividend rate. The investor is tax disadvantaged when dividend income is taxed at a higher rate than the capital gains tax rates.

To determine:

Dividend is tax disadvantaged or not for investors with one-year investment horizon.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

I mistakenly submitted blurr image please don't answer . comment please i will write values.

Assume that the following statements of financial position are stated and a book value. Alpha Corporation Current Assets $15,000 Current Liabilities $5,400 Net Fixed Assets 39,000 Long-Term Debt 10,100   Equity 38,500     $54,000   $54,000 Beta Corporation Current Assets $3,600 Current Liabilities $1,400 Net Fixed Assets 6,700 Long-Term Debt 2,100     Equity 6,800   $10,300   $10,300 Suppose the fair market value of Beta’s fixed assets is $9,500 rather than the $6,700 book value shown. Alpha pays $17,300 for Beta and raises the needed funds through an issue of long-term debt. Construct the post-merger statement of financial position now, assuming that the purchase method of accounting is used.

The shareholders of Barley Corporation have voted in favor of a buyout offer from Wheat Corporation. Information about each firm is given here: Barley Wheat Price/earnings ratio 13.5 21 Shares outstanding 90,000 210,000 Earnings $180,000 $810,000 Barley shareholders will receive one share of Wheat stock for every three shares they hold of Barley. Required What will the EPS of Wheat be after the merger? What will be the P/E ratio if the NPV of the acquisition is 0? What must Wheat feel is the value of the synergy between these two firms? Explain how your answer can be reconciled with the decision to go ahead with the takeover?

Answer 2

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 17, Problem 11P

Summary Introduction

Tax Advantage of Dividend: Investor got the tax advantage of tax when capital gain tax and dividend tax rate are same or capital gain rate is more than the dividend rate. The investor is tax disadvantaged when dividend income is taxed at a higher rate than the capital gains tax rates.

To determine:

Dividend is tax disadvantaged or not for investors with one-year investment horizon.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 17, Problem 11P

Summary Introduction

Tax Advantage of Dividend: Investor got the tax advantage of tax when capital gain tax and dividend tax rate are same or capital gain rate is more than the dividend rate. The investor is tax disadvantaged when dividend income is taxed at a higher rate than the capital gains tax rates.

To determine:

Dividend is tax disadvantaged or not for investors with one-year investment horizon.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

Chapter 17, Problem 11P

Summary Introduction