Question

In: Finance

Should an Investment Fund that can access imputations tax credits invest in companies that pay franked...

Should an Investment Fund that can access imputations tax credits invest in companies that pay franked or unfranked dividends? (Minimum 1 page response)

Solutions

Expert Solution

Franked dividend means those dividend which comes with already taxes paid so dividend are providing the shareholders with the tax benefits.

Unfranked dividend are those dividend which are not having any kinds of tax credits because they have not paying any taxes on dividend so shareholders will be liable to pay taxes on those Dividend.

An investment fund that can access imputation tax credit invest in companies that will pay dividend because it will help the investment fund in generating a larger rate of return because all the dividend which are accrued to this investment fund will already be coming up with the taxes paid so it will help the investment fund in maximization of the overall rate of return.

Frank dividend will help the the investment funds in saving of with the taxes which are due on the dividend and they will also get the tax credit so it will help them to increase the overall rate of return on the capital and it will also decrease their overall cost.


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