Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

As we saw in class, the cash flows to investors are typically taxed twice by the government: first at the corporate level, and then at

image text in transcribed

As we saw in class, the cash flows to investors are typically taxed twice by the government: first at the corporate level, and then at the personal (i.e., investor) level. Given this harsh reality, calculate the TOTAL amount of taxes the government (i.e., the IRS or "Uncle Sam") will receive this year from a company that pays a corporate tax rate of 26% AND from the company's investors (i.e., its debtholders and stockholders), when each of these two investor groups is taxed at a rate of 47%. Assume that this year the company's EBIT will be $586,000 and its interest expense will be $263,000 and also assume that all the company's net income will be received by the stockholders as a dividend. Write the answer rounded to the nearest dollar. Thus, if you believe the answer is $2,348.55 then write 2349 as your answer. (Acceptable error = $500)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Entrepreneurship

Authors: Andrew Zacharakis, William D Bygrave

5th Edition

1119563097, 9781119563099

More Books

Students also viewed these Finance questions

Question

What is the equation of a straight line?

Answered: 1 week ago

Question

Did you add the logo at correct size and proportion?

Answered: 1 week ago

Question

Did you ask for action?

Answered: 1 week ago