One year ago, you purchased 100 shares of Dog Bites common stock for $25. You received dividends of $.70 per share and just sold the shares for $26.25 each. Your marginal personal tax rate is 40%, your dividend tax rate is 30%, and capital gains are taxed at 50% of your personal rate. 1. What is your before-tax rate of return? 2. What is your after-tax rate of return?
One year ago, you purchased 100 shares of Dog Bites common stock for $25. You received dividends of $.70 per share and just sold the shares for $26.25 each. Your marginal personal tax rate is 40%, your dividend tax rate is 30%, and capital gains are taxed at 50% of your personal rate. 1. What is your before-tax rate of return? 2. What is your after-tax rate of return?
Chapter1: Federal Income Taxation—an Overview
Section: Chapter Questions
Problem 44P
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Transcribed Image Text:One year ago, you purchased 100 shares of Dog Bites common stock
for $25. You received dividends of $.70 per share and just sold the
shares for $26.25 each. Your marginal personal tax rate is 40%, your
dividend tax rate is 30%, and capital gains are taxed at 50% of your
personal rate.
1. What is your before-tax rate of return?
2. What is your after-tax rate of return?
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