Question

In: Finance

You are a shareholder in a C corporation. The corporation earns $2.12 per share before taxes....

You are a shareholder in a C corporation. The corporation earns $2.12 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. Assume the corporate tax rate is 38%and the personal tax rate on​ (both dividend and​ non-dividend) income is 25% How much is left for you after all taxes are​ paid?

The amount that remains is ​_____ per share.  ​(Round to the nearest​ cent.)

Solutions

Expert Solution

The income earned in the corporation is : $2.12

The amount left after paying for the corporate taxes is :

$2.12 - $2.12 * 0.38%

= $1.3144

The amount that remains after paying for the personal taxes is :

= $1.3144 - 0.25*$1.3144

= $0.9858

= $0.99 ( rounded off to the nearest cent)


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