receive $15 million in dividends from its subsidiary companies, on which annual tax of 20% on average has been paid. Limni Co itself pays annual tax at 26%, and the tax authorities where Limni Co is based charge tax on dividend remittances made by overseas subsidiary companies, but give full credit on tax already paid on those remittances . In order to fund the new policy of returning funds to shareholders, Limni Co's BoD wants to increase the current estimated dividend capacity by 10%, by asking the overseas subsidiary companies for higher repatriations.
Copyright © ACCAspace.com ACCAspace 中国 ACCA 特许公认会计师教育平台 7 Limni Co 45mins Required (a) Discuss Limni Co's current dividend, financing and risk management policies , and suggest how the decision to return retained funds back to the shareholders will affect these policies . (8 marks) (b) Evaluate the dividend policies of each of the three companies that Limni Co is considering investing in, and discuss which company Limni Co might select. (8 marks) (c) Calculate, and briefly comment on, how much the dividends from overseas companies need to increase by, to increase Limni Co's dividend capacity by 10%. (6 marks)