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Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $50,000 for the current year. Becouse of the lower tax
Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $50,000 for the current year. Becouse of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. Round your answers to nearest dollar, if required. a. How much better off would Kristen be if she were paid a dividend rather than salary? If Kristen were pald a bonus, she would receive receive after taxes. If Kristen recelves a divigend rather than salary, she would after taxes. Thus, she would be better off by recelving the b. How much better off would Egret Corporation be init paid Kristeh a salary rather than a dividend? The net after-tax cost of the bonus for Egret Corporation would be and the net after-tax cost for the dividend would be Therefore, tgret would be better of by it paid the if it paid the c. Assume Egret Corporation pays Kristen a salary bonus of $65,000 instead of a $50,000 dividend. Ir Egret Corporation were to pay Kristen a salary bonus of $65,000 instead of a $50,000 dividend, Kristen would receive after taxes. The bonus would cost Egret Corporation atter taxes. d. What should Kristen do? Both Egret Corporation and Kristen are better off with the
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