All else the same, an investor is likely to prefer a ﬁrm with a high dividend payout if marginal tax
rates on capital gains exceed marginal tax rates on dividends.

Question

Quizplus · Accepted Answer

If marginal tax rates on capital gains exceed marginal tax rates on dividends, an investor would prefer receiving dividends as they would be taxed at a lower rate. Therefore, a high dividend payout would be more attractive to such an investor.

All Else the Same, an Investor Is Likely to Prefer