The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains . Introduction: The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

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Answer 1

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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 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

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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.

Answer 2

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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 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Expert Solution & Answer

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Answer 3

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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 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Expert Solution & Answer

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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 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Expert Solution & Answer

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Answer 5

Chapter 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Answer 6

Chapter 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Answer 7

Chapter 17.3, Problem 1CC

Summary Introduction

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Answer 8

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Answer 10

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Answer 11

Ch. 17.1 - Prob. 1CC Ch. 17.1 - Prob. 2CC Ch. 17.2 - Prob. 1CC Ch. 17.2 - In a perfect capital market, how important is the...Ch. 17.3 - Prob. 1CC Ch. 17.3 - Prob. 2CC Ch. 17.4 - Prob. 1CC Ch. 17.4 - Prob. 2CC Ch. 17.5 - Is there an advantage for a firm to retain its...Ch. 17.5 - Prob. 2CC

The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains . Introduction: The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Solution Summary: The author explains that the optimal dividend policy is to pay or distribute no dividends when the rate of tax of dividend exceeds the capital gains tax rate.

Concept explainers

Videos

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Want to see the full answer?

Chapter 17 Solutions

The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains . Introduction: The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

Solution Summary: The author explains that the optimal dividend policy is to pay or distribute no dividends when the rate of tax of dividend exceeds the capital gains tax rate.

Concept explainers

Videos

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains. Introduction: The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.

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Chapter 17 Solutions

To discuss: The optimal dividend policy when the rate of tax of the dividend exceeds the rate of tax of capital gains.

Introduction:

The shareholders of the company must pay a dividend tax when they receive the dividends and they have to pay capital gain taxes when they sell their shares.