alleryStart learning →Does a company get a tax deduction for the dividends it pays?
AYes, in full
BYes, up to half
CYes, for cash only
DNo, none at all
Answer & Solution
Correct answer: D. No, none at all
Dividends come out of after-tax profit, so the paying corporation gets no deduction for them.
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Which limits can restrict how much a firm may distribute as dividend?Why might management avoid changing dividend policy abruptly?Which alternative to cash dividends may a firm choose when surplus cash exists?Which type of shareholder usually prefers earnings to be retained?With no NPV-positive projects and surplus cash, what should management do?Management knowing more than the market is called what?If dividends bear higher tax than gains, raising them does what to value?Per the Modigliani-Miller theorem, dividend policy has what effect on firm value?