1. A firm in Australia earns a pretax profit of $A10 per share. Suppose that it pays a corporate tax of $3 per share (30% tax rate) in taxes. The firm pays the remaining $A7 in dividends to a shareholder in the 30% marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax system?

A.$A 2.10B.$A 0.00C.$A3.00D.$A 5.10

1. A firm in Australia earns a pretax profit of $A10 per share. Suppose that it pays a corporate tax of $3 per share (30% tax rate) in taxes. The firm pays the remaining $A7 in dividends to a shareholder in the 40% marginal tax bracket. What is the amount of additional tax paid by the shareholder under an imputation tax system?

A.$A1.00B.$0.00C.$A4.00D.$A5.80