New Business is just being forme investors, each of whom will own business. The firm is expected to $1,600,000 before taxes each yea corporate tax rate is 34% and the
New Business is just being forme investors, each of whom will own business. The firm is expected to $1,600,000 before taxes each yea corporate tax rate is 34% and the
Chapter2: The Domestic And International Financial Marketplace
Section2.A: Taxes
Problem 5P
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4
![New Business is just being formed by 20
investors, each of whom will own 5% of the
business. The firm is expected to earn
$1,600,000 before taxes each year. The
corporate tax rate is 34% and the personal tax
rate for the firm's investors is 24%. The firm
does not need to retain any earnings, so all of
its after-tax income will be paid out as
dividends to its investors. The investors will
have to pay personal taxes on whatever they
receive. How much additional spendable
income will each investor have if the business
is organized as a partnership rather than as a
corporation?
a. $8,000
b. $6,592
c. $20,672
d. $14,592
e. $25,952](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6d667ae1-1d84-45a4-b939-2aa5c5155dc5%2F1aa70cd3-634e-47e6-8ed2-1a8d5379058d%2Fp043md5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:New Business is just being formed by 20
investors, each of whom will own 5% of the
business. The firm is expected to earn
$1,600,000 before taxes each year. The
corporate tax rate is 34% and the personal tax
rate for the firm's investors is 24%. The firm
does not need to retain any earnings, so all of
its after-tax income will be paid out as
dividends to its investors. The investors will
have to pay personal taxes on whatever they
receive. How much additional spendable
income will each investor have if the business
is organized as a partnership rather than as a
corporation?
a. $8,000
b. $6,592
c. $20,672
d. $14,592
e. $25,952
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