36 which of the following investors has the strongest

36. Which of the following investors has the strongest tax reason to prefer dividends over capital gains?
A. Pension funds
B. Financial institutions
C. Individuals
D. Corporations
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Difficulty: Intermediate
37. If the corporate tax rate is 35 percent, what is the maximum effective tax rate on dividends received by
another corporation?
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Difficulty: Intermediate
38. Dividend policy may affect firm value because
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Difficulty: Challenge
39. A firm in Australia earns a pretax profit of $A10 per share. Suppose that it pays a corporate tax of $3 per share
(30 percent tax rate) in taxes. The firm pays the remaining $A7 in dividends to a shareholder in the 30 percent
marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax
system?
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Difficulty: Intermediate
40. A firm in Australia earns a pretax profit of $A10 per share. Suppose that it pays a corporate tax of $3 per share
(30 percent tax rate) in taxes. The firm pays the remaining $A7 in dividends to a shareholder in the 40 percent
marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax
system?

A. $A1
B. $0
C. $A4
D. $A5.80
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Difficulty: Intermediate
41. Companies using a tender offer to repurchase shares typically offer a stock price greater than the current stock
price.
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Difficulty: Basic
42. Firms can pay out cash to their shareholders in two ways: cash dividends and stock dividends.
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Difficulty: Basic
43. In 2009, JPMorgan Chase cut its dividend down to $0.05 per share and the bank's share price increased
in response.
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Difficulty: Intermediate
44. Adoption of Rule 10b-18 by the SEC has protected firms from being prosecuted for manipulating their
share price through share repurchases.
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Difficulty: Challenge
45. A high-dividend policy is more difficult for a weak firm than for a strong firm because a weak firm likely will
not have the cash to support it.
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Difficulty: Basic
46. Healy and Palepu found that the stock price of firms that stopped paying a dividend declined by 9.5 percent
on average upon announcement.