You are a shareholder in a C-corporation. The company earns $4.50 per share before taxes. Assume...

You are a shareholder in a C-corporation. The company earns $4.50 per share before taxes. Assume the corporate tax rate is 40%. After paying taxes it will apply its Payout Ratio of 90% and pay dividends accordingly. Assumed the personal income (dividend and non-dividend income) tax rate is 25%.
1. What is the (per share) corporate tax payment?
2. What is the dividend?
3. What is the (per share) personal tax payment?
4. What is the (per share) after tax income?
5. Repeat steps a-d assuming the firm is an S-corporation.

Expert Solution

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