Problem 19-48 (Algorithmic) (LO. 4)

Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $277,500 for the current year. Because 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 paid a bonus, she would receive $210,900 after taxes. If Kristen receives a dividend rather than salary, she would receive $235.875 after taxes. Thus, she would be better off by receiving the dividend.

B. How much better off would Egret Corporation be if it paid Kristen a salary rather than a dividend? The net after-tax cost of the bonus for Egret Corporation would be $219,225 and the net after-tax cost for the dividend would be $277,500 . Therefore, Egret would be better off by __???__ if it paid the bonus .

Please help with Problem B, "Therefore, Egert would be better off by __ if it paid the bonus."