Which one of the following favors a low dividend policy?
A) The tax on capital gains is deferred until the gain is realized.
B) Few, if any, positive net present value projects are available to a firm.
C) A majority of the shareholders have a low tax rate.
D) A majority of the shareholders have better investment opportunities than the firm.
E) The presence of an agency conflict with the company's senior managers.

Question

Quizplus · Accepted Answer

The tax on capital gains is deferred until the gain is realized, which can make a low dividend policy more attractive to investors who prefer to defer taxes and potentially benefit from lower capital gains tax rates compared to dividend taxes.

Which One of the Following Favors a Low Dividend Policy