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?

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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Question

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Can you provide the accurate answer to this financial accounting question using correct methods?

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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