For each of the following statements indicate whether the statement is true or false and explain why.

a) Under the classical tax system dividends are effectively taxed at the higher of the personal or corporate tax rate.

b) Under the imputation tax system dividends are effectively taxed at the lower of the personal or corporate tax rate.

c) A company can pay a dividend only if it is currently earning profits.

d) The residual dividend policy is used by most companies