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Part B is wrong Kraftstoff of Germany. Kraftstoff is a German-based company that manufactures electronic fuel-injection carburetor assemblies for several large automobile companies in Germany,
Part B is wrong
Kraftstoff of Germany. Kraftstoff is a German-based company that manufactures electronic fuel-injection carburetor assemblies for several large automobile companies in Germany, including Mercedes, BMW, and Opel. The firm, like many firms in Germany today, is revising its financial policies in line with the increasing degree of disclosure required by firms if they wish to list their shares publicly in or out of Germany. Kraftstoff's primary problem is that the German corporate income tax code applies a different income tax rate to income depending on whether it is retained (45%) or distributed to stockholders (28%). The company's earnings before tax (EBT) is 482,000,000. a. If Kraftstoff planned to distribute 50% of its net income, what would be its total net income and total corporate tax bills? b. If Kraftstoff was attempting to choose between a 40% and 60% payout rate to stockholders, what arguments and values would management use in order to convince stockholders which of the two payouts is in everyone's best interest? b. If Kraftstoff was attempting to choose between a 40% and 60% payout rate to stockholders, calculate its total net incomes and total corporate tax bills in the following table: (Round to the nearest whole euro.) Kraftstoff's Income Items 40% payout 60% payout Earnings before taxes (EBT) 482,000,000 (134,960,000) 482,000,000 (134,960,000) Less income taxes at 28% Net income 347,040,000 347,040,000 Distributed income (1) 138,816,000 208,224,000 Less added distributed income taxes 0 0 fter-tax distributed income 138,816,000 208,224,000 Retained income 208,224,000 138,816,000 Less added retained income taxes 16,657,920 11,105,280 After-tax retained income 191,566,080 (11) 127,710,720 Total after-tax net income 330,382,080 335,934,720 Total income taxes (1)Step by Step Solution
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