Question

You are a shareholder in a corporation. the corporation earns $5.00 per share before taxes. after it has paid taxes, it will distribute the rest of its earnings to you as a dividend (we make this simplifying assumption, but should note that most corporations retain some of their earnings for reinvestment). the dividend is income to you, so you will then pay taxes on these earnings. the corporate tax rate is 40% and your tax rate on dividend income is 15%. how much of the earnings remains after all taxes are paid?

Answer 1

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