Question

Bryan Houlberg expects his C corporation to generate a profit of $200,000. What is Bryan's after-tax cash flow from the corporation if net income after corporate tax is distributed to him as a dividend and his marginal tax rate on ordinary income is 37%?

Answer 1

`\$ 117,937.50`

Step-by-step explanation:

Corporate level tax on $200,000 is $61,250

Cash(After Corporate tax)=
`\$ 200,000 -\$ 61,250=\$138,750`

Individual tax on $138,750(15%)=
`0.15*138750=\$ 20812.5`

Hence, net after tax cashflow :

`\$ 138,750-\$20,812.5\\=\$117,937.50`