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 has a low relevant tax rate
D)a majority of the shareholders has better investment opportunities with similar risks
E)corporate tax rates exceed personal tax rates

Question

Quizplus · Accepted Answer

The tax on capital gains is deferred until the gain is realized, which means investors can delay paying taxes on any increase in the value of their investments until they actually sell the shares. This deferral can make a low dividend policy more attractive, as it allows investors to potentially pay less in taxes over time compared to receiving dividends, which are taxed in the year they are received.

Which One of the Following Favors a Low Dividend Policy