How would changes in the following impact a firm's payout ratio?
Not what you're looking for?
1) How would each of the following changes tend to affect aggregate (that is, the average for all corporations) payout ratios, other things held constant? Explain your answers.
a. An increase in the personal income tax
b. A liberalization of depreciation for federal income tax purposes?that is, faster tax write offs
c. A rise in interest rates
d. An increase in corporate profits
e. A decline in investment opportunities
f. Permission for corporations to deduct dividends for tax purposes as they now do interest charges
g. A change in the Tax Code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividends
Purchase this Solution
Solution Summary
This solution provides answers to questions on an increase in the personal income tax, a liberalization of depreciation for federal income tax purposes (faster tax write offs), a rise in interest rates, an increase in corporate profits, a decline in investment opportunities, permission for corporations to deduct dividends for tax purposes as they now do interest charges, and a change in the Tax Code so that both realized and unrealized capital gains in any year were taxed at the same rate as dividends would impact payout ratios.
Solution Preview
1) How would each of the following changes tend to affect aggregate (that is, the average for all corporations) payout ratios, other things held constant? Explain your answers.
a. An increase in the personal income tax
Decrease the payout ratios
An increase in personal income tax rates means that the dividends are taxed more heavily at the investor level. The investors would prefer capital gains -which would be taxed at a lower rate- rather than receive income in the form of dividends.
b. A liberalization of depreciation for ...
Purchase this Solution
Free BrainMass Quizzes
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.