Which of the following is an unlikely reason as to why a company would not pay a high franked dividend payout ratio?
A)Shareholders may be tax-exempt.
B)It is running short of cash to finance new investments.
C)Shareholders may not be residents.
D)Shareholders are on the same marginal tax rate as the company.

Question

Quizplus · Accepted Answer

Franked dividends are taxed at the company rate before being distributed to shareholders, who then get a tax credit for the tax already paid by the company. If shareholders are on the same marginal tax rate as the company, there's no disadvantage in receiving franked dividends, making it an unlikely reason for a company not to pay a high franked dividend payout ratio.

Which of the Following Is an Unlikely Reason as to Why