Question
Moncton Meats is a corporation that earned $3 per share before it paid any taxes. The firm retained $1 of earnings for reinvestment, and distributed
Moncton Meats is a corporation that earned $3 per share before it paid any taxes. The firm retained $1 of earnings for reinvestment, and distributed what remained in dividend payments. You hold 20,000 shares of Moncton Meats. The corporate tax rate is 30%, dividend earnings are taxed at 20%, and the personal income tax rate is 40%. Suppose instead that Moncton Meats is a sole proprietorship, and you are the owner. Calculate your per share after-tax earnings from the sole proprietorship, assuming you pay the same dividend per share as in part Also calculate the difference In your after-tax earnings between being the sole proprietor and being a shareholder m the corporation.
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