ValiantCorp is a C corporation that earned$ 3.90 per share before it paid any taxes. ValiantCorp retained $1 of after tax earnings for reinvestment, and distributed what remained in dividend payments. If the corporate tax rate was 35 %

and dividend earnings were taxed at 12.5%, what was the value of the dividend earnings received after tax by a holder of 100,000 shares of ValiantCorp?

Question

Business

Marques Simpson

16 July, 18:15

ValiantCorp is a C corporation that earned$ 3.90 per share before it paid any taxes. ValiantCorp retained $1 of after tax earnings for reinvestment, and distributed what remained in dividend payments. If the corporate tax rate was 35 %

and dividend earnings were taxed at 12.5%, what was the value of the dividend earnings received after tax by a holder of 100,000 shares of ValiantCorp?

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Brendon Payne · Answer 1

the investor wil receive a net of 87,500 dollar after the taxation on diviends.

Explanation:

we are given with the after-tax distribution for the company at $1 dollar per share

100,000 shares x $1 each = $100,000 cash dividends

then we apply the dividends earnings taxation to solve for how much is the after tax cash received by the holder:

$100,000 x (1 - 0.125) = $87,500