Arc Ltd. has $1,000 excess cash. It can declare a dividend now (choice 1) or invest the

Question:

Arc Ltd. has $1,000 excess cash. It can declare a now (choice 1) or invest the money and pay the in one year (choice 2). The tax rates and interest rate are shown below.
Corporate tax rate ............................ 40%
Personal tax rate .............................. 50%
Dividend tax rate ............................ 37.215%
Interest rate ................................... 10.000%
Required:
(a) Calculate the total after-tax cash flow to the investor under both choices.
(b) Which choice leaves the investor better off? Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...