You are a shareholder in Delta Systems, a "C" corporation. The company earns $5.00 per share before taxes. After paying 40% corporate tax, it distributes the remainder as dividends. Your personal tax rate on dividends is 20%. What is the effective tax rate on your share of corporate earnings?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter6: Accounting For Financial Management
Section: Chapter Questions
Problem 8P
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Financial Accounting

You are a shareholder in Delta Systems, a "C" corporation. The
company earns $5.00 per share before taxes. After paying 40%
corporate tax, it distributes the remainder as dividends. Your personal
tax rate on dividends is 20%. What is the effective tax rate on your
share of corporate earnings?
Transcribed Image Text:You are a shareholder in Delta Systems, a "C" corporation. The company earns $5.00 per share before taxes. After paying 40% corporate tax, it distributes the remainder as dividends. Your personal tax rate on dividends is 20%. What is the effective tax rate on your share of corporate earnings?
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