Market Value of Franking Credits and Methods of Estimating - Literature Review

Literature Review
The market value of franking credits and methods of estimating

ABSTRACT
Dividend imputation credit is from of tax credit provided to taxpayer to avoid double taxation of
corporate dividends. These credits can be fully or partially franked in nature and can have a
significant impact on tax obligations and investment decision of the taxpayers. By considering
the significance of the topic, the study evaluates franking credits and dividends and its market
value by studying the viewpoint of various authors. The study concludes that franking credit is
introduced to prevent “double dipping” through the government as tax cannot be charged on
profits on which dividend is already paid by companies. Further computation of the market
value of dividend and its franking credit can be done by Gamma applied in the Weighted
Average Cost of Capital and Dividend Drop Off.

Table of Contents
Introduction......................................................................................................................................1
Overview on franking credits......................................................................................................1
Categories of flaking credits........................................................................................................2
Market value of franking credits..................................................................................................3
Methods of estimating.................................................................................................................4
Conclusion.......................................................................................................................................5
References........................................................................................................................................6