Question

You are a shareholder in a C corporation. The corporation earn $3 per share before taxes. Once it has paid taxes, it will distribute the rest of its earning to you as a dividend. The corporate tax rate is 35 % and the personal tax on ( both dividend and non-dividend) income is 20%. How much is left for you after all taxes are paid??

The amount that remains is $ Per share

Answer 1

The money left for you is $1.56 per share.

Explanation:

Consider the provided information.

The corporation earn $3 per share before taxes.

Earnings of the corporation = $3/share

The corporate tax rate is 35 % = 0.35

Therefore, the dividend paid per share = 3×(1 -0.35) = $1.95/share

The dividend is the personal income so taxed 20% = 0.20

Therefore,

Final amount received = 1.95×(1 - 0.2) = $1.56/share

Hence, the money left for you is $1.56 per share.