Griffey Communications recently realized $112,500 in operating income. The company had interest income of $25,000 andrealized $70,000 in dividend income. The company's interest expense was $50,000. Its corporate tax rate is 25%. Griffey is asmall company, so it is not subject to the interest expense deduction limitation.Assume a 50% dividend exclusion for taxes on dividends.O a. $39,375O b. $21,875c. $43,125O d. $30,625e. $51,875

Information Provided: Operating Income = $112,500 Interest income = $25,000 Dividend income =…

Answered: Assume a 50% dividend exclusion for…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Suppose that TapDance, Inc.s capital structure features 60 percent equity, 40 percent debt, and that its before-tax cost of debt is 6 percent, while its cost of equity is 11 percent. The appropriate weighted average tax rate is 21 percent. What will be TapDance's WACC? (Round your answer to 2 decimal places.)
Find the after-tax return to a corporation that buys a share of preferred stock at $58, sells it at year-end at $58, and receives a $4 year-end dividend. The firm is in the 21% tax bracket. (Round your answer to 2 decimal places.)
c. If Tp = 15 percent and TG = 30 percent, how much will the share price fall? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Share price d. Suppose the only owners of stock are corporations. Recall that Corporations get at least a 50 percent exemption from taxation on the dividend income they receive, but they do not get such an exemption on capital gains. If the corporation's income and capital gains tax rates are both 21 percent, what does this model predict the ex- dividend share price will be? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Share price D N. Elton and M. Gruber, "Marginal Stockholder Tax Rates and the Clientele Effect," Review of Economics and Statistics 52 (February 1970).
Ginger, Incorporated, has declared a $8 per share dividend. Suppose capital gains are not taxed, but dividends are taxed aT 18 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The company's stock sells for $83 per share, and the stock is about to go ex-dividend. What do you think the ex-dividend price will be?
a) Ex-Dividend Price Company A has declared a dividend of $2.60 per share. Suppose capital gains are not taxed but dividends are taxed at 15 percent. New IRS regulations require that taxes be withheld at the time the dividend is paid. The stock closed at $36.80 per share today and the stock goes ex dividend tomorrow. What will be the ex-dividend price? b) Market value and homemade dividends An investor own 100 shares of Firm X. The company will pay 0.50 per share this year and final liquating dividend of $42 per share next year. The required return of this stock is 14%. Ignoring taxes, what is the current market value of one share of this stock? What will the investor's homemade dividend per share be next year if they do not want any dividend this year? (hint: buy shares with the dividends this year)
Where a dividends-received deduction adds to or creates a net operating loss, the taxable income limitation decreases from 50 percent to 34 percent. A. True B. False
please answer in 30 mins.
which of these two has a higher after-tax yield, assuming a 21% income tax bracket? a. 4.00% taxable b. 3.25% tax-free band
Find the after-tax return to a corporation that buys a share of preferred stock at $45, sells it at year-end at $45, and receives a $3 year-end dividend. The firm is in the 30% tax bracket.
d. Suppose the only owners of stock are corporations. Recall that corporations get at least a 50 percent exemption from taxation on the dividend income they receive, but they do not get such an exemption on capital gains. If the corporation's income and capital gains tax rates are both 33 percent, what does this model predict the ex- dividend share price will be? (Do not round intermediate calculations and round. your answer to 4 decimal places, e.g., 32.1616.)
taxable income of $299373 that includes $19309 in dividends has how much of a tax liability
Susan Corp wants to pay dividends to their investors . On July 23, 2021, the company publicly announces that the company is going to pay the dividend to investors on record as of September 1, 2021. The dividend will be paid to investors on September 10, 2021. On what date will Susan Corp reduce retained earnings for these dividends? Group of answer choices July 23 September 1 September 10 December 31 Retained earnings is not reduced by dividends.

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