Asked by Terry Valentine on May 16, 2024
Verified
An investor in a relatively high personal income tax bracket would likely prefer a firm with a high dividend payout rate.
Personal Income Tax
A tax levied by governments on individuals or households based on their income, with the rate often varying based on income levels.
Dividend Payout Rate
A measure of the percentage of earnings a company pays to its shareholders in the form of dividends.
High Dividend
Refers to stocks or securities that pay out significant portions of profit in the form of dividends compared to their stock price.
- Uncover variables influencing the choice of dividend policies preferred by investors.
- Analyze the effects of taxation on dividend preferences and policies.
Verified Answer
MC
Maria CodispotiMay 20, 2024
Final Answer :
False
Explanation :
Investors in high personal income tax brackets often prefer firms with lower dividend payout rates to avoid the immediate tax liability on dividends, favoring capital gains which are taxed at a potentially lower rate and only upon sale of the stock.
Learning Objectives
- Uncover variables influencing the choice of dividend policies preferred by investors.
- Analyze the effects of taxation on dividend preferences and policies.