Question

You are a shareholder in a C corporation. The corporation earns $ 1.86$1.86 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 40 %40% and the personal tax rate on​ (both dividend and​ non-dividend) income is 28 %28%. How much is left for you after all taxes are​ paid?

Answer 1

After all taxes being paid net dividend received = $0.80352

Step-by-step explanation:

As for the provided information we have,

Earnings per share before taxes = $1.86

Now, provided corporate dividend tax rate = 40%

Therefore, earnings per share after tax = dividend received = $1.86 - $1.86
`*` 40% = $1.86 - $0.744 = $1.116

Provided tax rate in hands of individuals = 28%

After tax dividend, that is net dividend received = $1.116 - ($1.116
`*` 28%) = $1.116 - $0.31248 = $0.80352