Albert owns 100% of A Corporation, Betty is the sole proprietor of B Company, and Cai is the sole proprietor of Company. Each business generated $500,000 of taxable income and before-tax cash flow. A Corporation and B Company produce a product, but c Company provides accounting services. A Corporation will distribute all of its after-tax income to Albert. All three owners face a 37% marginal tax rate on ordinary income. B Company qualifies for the $ 199A deduction, but c Company does not because it provides accounting services and its taxable income exceeds the threshold for that deduction. Assume the tax rate applied to dividend income equals the top 20% net long-term capital gain rate plus the 3.8% net investment income tax rate. The corporate tax rate is 21% and 5 199A deduction is 20%. What will be the values of A Corporation, B Company, and C Company after three years? Assume that each business can reinvest its after- tax cash flow back into the business and that there is no unrealized appreciation of their assets. If required, round your answers to the nearest dollar. A Corporation B Company C Company Initial investment $5,000,000 $5,000,000 $5,000,000 Taxable income to owners in year 1 395,000 400,000 500,000 After-tax cash flow for year 1 300,990 352,000 315,000 Investment at end of year 1 X Taxable income to owners in year 2 After-tax cash flow for year 2 Investment at end of year 2 Taxable income to owners in year 3 LINTI LIITI After-tax cash flow for year 3 Investment at end of year 3 Albert owns 100% of A Corporation, Betty is the sole proprietor of B Company, and Cai is the sole proprietor of Company. Each business generated $500,000 of taxable income and before-tax cash flow. A Corporation and B Company produce a product, but c Company provides accounting services. A Corporation will distribute all of its after-tax income to Albert. All three owners face a 37% marginal tax rate on ordinary income. B Company qualifies for the $ 199A deduction, but c Company does not because it provides accounting services and its taxable income exceeds the threshold for that deduction. Assume the tax rate applied to dividend income equals the top 20% net long-term capital gain rate plus the 3.8% net investment income tax rate. The corporate tax rate is 21% and 5 199A deduction is 20%. What will be the values of A Corporation, B Company, and C Company after three years? Assume that each business can reinvest its after- tax cash flow back into the business and that there is no unrealized appreciation of their assets. If required, round your answers to the nearest dollar. A Corporation B Company C Company Initial investment $5,000,000 $5,000,000 $5,000,000 Taxable income to owners in year 1 395,000 400,000 500,000 After-tax cash flow for year 1 300,990 352,000 315,000 Investment at end of year 1 X Taxable income to owners in year 2 After-tax cash flow for year 2 Investment at end of year 2 Taxable income to owners in year 3 LINTI LIITI After-tax cash flow for year 3 Investment at end of year 3
