Johnson and Bradley Inc. invested $10,000 in 200 shares of ABC stock 18 months ago, and just sold all of them for $12,500. If it is subject to a tax rate of 21%, what is the tax rate on this investment income?
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Johnson and Bradley Inc. invested $10,000 in 200 shares of ABC stock 18 months ago, and just sold all of them for $12,500. If it is subject to a tax rate of 21%, what is the tax rate on this investment income?
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- Moncton Meats is a corporation that earned $3 per share before it paid any taxes. The firm retained $1 of after-tax earnings for reinvestment, and distributed what remained in dividend payments. You hold 20,000 shares of Moncton Meats in a tax-free savings account. If the corporate tax rate was 30% and dividend earnings were taxed at 20%, what was the value of your dividend earnings received after all taxes are paid?Last year, Martyn Company had $500,000 in taxable income from its operations, $50,000 in interest income, and $100,000 in dividend income. Using the corporate tax rate table given below, what was the company's tax liability for the year?As a financial analyst at Deutsche Bank, you are analyzing the after tax returns for your client. Suppose your client bought a share of stock of AMD at $60, a share of stock Oracle at $70, and a share of IBM at $80. A year later, after your client received a $3 dividend from AMD, $4 dividend from Oracle, and $5 from IBM, he sold the stock AMD at $65 per share, sold Oracle at $75, and sold IBM at 80. What are the expected after tax returns for your client if your client is (a) a church investment fund (tax-exempt status) (Sample answer: 10.55%) (b) a corporation paying tax at 21% (remember that corporations may exclude 70% of dividends received from domestic corporations in the computation of their taxable income) (Sample answer: 10.55%) (c) an individual paying tax at 21% on capital gains and dividend income at 35%? (Sample answer: 10.55%) (d) a security dealer paying tax at 28% on both dividend income and capital gains? (Sample answer: 10.55%)
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- Genesis Group is a C-Corporation with $200,000,000 in pre-tax profits. It pays 30% of net income as dividends. The personal wage income tax rate is 40%, and the personal dividend income tax rate is 15%. It has 10,000,000 shares outstanding. What will happen to the after-tax income per share after the corporate tax rate falls from 35% to 20%Griffin Doors earns $1 million in annual EBIT in perpetuity on its $5million in assets. After making repairs to assets to exactly offset depreciation, all earnings are paid out as dividends. The firm is entirely owner financed (no debt) so its cost of capital is its cost of equity, which is 10%. The corporate tax rate is 30%. How much is Griffin Doors worth to its owners? If the company borrows $1 million and uses that money to buy back shares from the owners, how will this affect the value of the firm? Be specific. What will the company’s WACC be after the it borrows the money? Why do most small businesses operate with less leverage than Miller and Modigliani’s model would consider to be optimal? *Hint – do not need the cost of debt.Martin Company has 500k in taxable income, 50k in interest income, 100k in dividend income. Using the corporate tax rate table, what is the company's tax liability for the year?
