Which of the following is NOT a consequence of the double tax on dividends?     Question 15 options:   Corporations have an incentive to retain earnings and structure distributions to avoid dividend treatment.   Corporations have an incentive to invest in non-corporate rather than corporate businesses.   The cost of capital for corporate investment is increased.   Corporations have an incentive to finance operations with debt rather than equity.   All of the above are consequences of the double tax on dividends.

Please answer MCQ

Which is not a benefit of debt to the corporation?a. interest payments are tax deductibleb. when debt is used heavily, it increases stock valuec. In periods of inflation, debt is paid back with amounts that are worth less than the ones borrowed.d. compared to equity, debts have a lower cost of capitale. answer not given

4. Which of the below statements is false about the Static Tax Clientele Theory of payout policy? Investors with high capital gains tax relative to marginal income tax prefer cash dividends An individual company cannot increase its value by changing its payout policy Companies with high dividend payout rates attract investors with relatively low tax rates There is a static equilibrium where companies with low dividend payout rates attract investors with relatively high tax rates None of the above

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Assume that the tax on dividends and the tax on capital gains is the same. All else equal, what would a prudent investor prefer?   A. More information is needed.   B. The prudent investor would prefer dividends—a dollar today is always worth more than a dollar to be received in the future.   C. The prudent investor would be indifferent between receiving dividends or capital gains.   D. The prudent investor would prefer capital gains—the capital gain tax liability can be deferred until gains are realized.

4. Classify each of the following factors/cases based on whether they favor a low dividend policy or high dividend policy? (explain why) 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.

Under the trade-off theory, lowering the corporate tax rate will incentivize companies to increase the ratio of debt in their capital structure.   Question options:   a) True   b) False

Modigliani and Miller Proposition II states that: the optimal capital structure occurs when the marginal cost of distress equals the marginal benefit of interest tax shields the cost of cost of levered equity is equal to the cost of unlevered equity, in the absence of taxes, since the value of the levered firm equals the value of the unlevered firm. the capital structure if the firm is irrelevant, regardless of the corporate tax rate. the cost of levered equity is equal to the cost of unlevered equity plus a premium that is proportional to the (market value) debt-to-equity ratio