Question
1) Consider a C corporation. The corporation earns $5 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 100%
1) Consider a C corporation. The corporation earns $5 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 100% of its earnings to its shareholders as a dividend. The corporate tax rate is 40%, the tax rate on dividend income is 28%, and the personal income tax rate is set at 28%.
a)What are the shareholder's earnings from the corporation after all corresponding taxes are paid?
b)How much is the total effective tax rate on the corporation earnings?
2) Consider a C corporation. The corporation earns $5 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 50% of its earnings to its shareholders as a dividend. The corporate tax rate is 40%, the tax rate on dividend income is 28%, and the personal income tax rate is set at 28%
a)What are the shareholder's earnings from the corporation after all corresponding taxes are paid?
b)How much is the total effective tax rate on the corporation earnings?
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
10th edition
978-0077511388, 78034779, 9780077511340, 77511387, 9780078034770, 77511344, 978-0077861759
