Suppose that the government has a wealth tax at the rate of 2% on the assessed value of wealth. Suppose that Wendy has invested all her wealth in a private corporation. Her wealth amounts to $4,000,000 in shares of this company. Suppose that this stock delivers a dividend income of $200,000 per year. Assume there is no inflation and that interest rates are 3%. Show your work. 1. Wendy’s wealth tax liability is $___________________. 2. Wendy’s shares generate a net of tax income is $___________________ per year. 3. Suppose a Conservative party were elected on a platform of eliminating the wealth tax. The value of Wendy’s shares if the wealth tax was eliminated would be $______________.
Suppose that the government has a wealth tax at the rate of 2% on the assessed value of wealth. Suppose that Wendy has invested all her wealth in a private corporation. Her wealth amounts to $4,000,000 in shares of this company. Suppose that this stock delivers a dividend income of $200,000 per year. Assume there is no inflation and that interest rates are 3%. Show your work. 1. Wendy’s wealth tax liability is $___________________. 2. Wendy’s shares generate a net of tax income is $___________________ per year. 3. Suppose a Conservative party were elected on a platform of eliminating the wealth tax. The value of Wendy’s shares if the wealth tax was eliminated would be $______________.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose that the government has a wealth tax at the rate of 2% on the assessed value of wealth. Suppose that Wendy has invested all her wealth in a private corporation. Her wealth amounts to $4,000,000 in shares of this company. Suppose that this stock delivers a dividend income of $200,000 per year. Assume there is no inflation and that interest rates are 3%. Show your work.
1. Wendy’s wealth tax liability is $___________________.
2. Wendy’s shares generate a net of tax income is $___________________ per year.
3. Suppose a Conservative party were elected on a platform of eliminating the wealth tax. The value of Wendy’s shares if the wealth tax was eliminated would be $______________.
4. The elimination of the wealth tax would reduce government tax revenue and create a budget deficit. Suppose that the country currently has no income tax, but the deficit has the government considering introducing a personal income tax that would replace the lost wealth tax revenue. A personal income tax rate of _______% would generate the same amount of revenue from Wendy as the old wealth tax.
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