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You are a consultant that has been hired to recommend a payout policy for UBT Corp. You have compiled a table with the current tax
You are a consultant that has been hired to recommend a payout policy for UBT Corp. You have compiled a table with the current tax rates that different types of investors in the stock market face (see table below). Assume that all of UBT's shareholders are investors of Type 1 and Type 2. Given this information, how should UBT structure its payout policy? Select the best one. I. The company should only repurchase shares, because Type 2 investors will prefer repurchases and Type 1 investors will be indifferent between dividends and repurchases. II. The company should only pay dividends, because Type 2 investors will prefer dividends and Type 1 investors will also pefer dividends III. Both investor groups will be indifferent between the company paying dividends or repurchasing shares. IV. The company should only repurchase shares, because Type 1 investors will prefer repurchases and Type 2 investors will be indifferent between dividends and repurchases. V. The company should only pay dividends, because Type 1 investors will prefer dividends and Type 2 investors will be indifferent between dividends and repurchases
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