uppose that the government has a wealth tay at the rate of 2% on the assessed value of wealth
uppose that the government has a wealth tay at the rate of 2% on the assessed value of wealth
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $_
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