Question

QUESTION 3

"Consider a C corporation. The corporation earns $1 per share before taxes. After the corporation has paid its corresponding taxes, it will distribute 30% of its earnings to its shareholders as a dividend. The corporate tax rate is 35%, the tax rate on dividend income is 28%, and the personal income tax rate is set at 28%. What are the shareholder's earnings from the corporation after all corresponding taxes are paid? Note: Express your answers in strictly numerical terms. For example, if the answer is 5%, enter 0.05 as an answer; or if the answer is $500, write enter 500 as an answer.

Answer 1

Particulars	Amount
Earnings	1.00
Less: tax@35%	(0.35)
Balance	0.65
Dividends	0.23
Tax on dividends	0.06
Earnings to shareholder	0.16

Answer is:

0.16

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