MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
15th Edition
ISBN: 9780134479903
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.9P
a)
Summary Introduction
To determine: The firm’s tax on its operating earnings
b)
Summary Introduction
To determine: The tax and after-tax amount attributable to the interest income of the firm.
c)
Summary Introduction
To determine: The tax and after-tax amount attributable to the dividend income of the firm.
d)
Summary Introduction
To discuss: The comparison and contrast on the after-tax amount resulting from both dividend income and interest income.
e)
Summary Introduction
To determine: The total tax liability.
Introduction:
Tax liability is an amount owed to a tax authority by the company.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
During the year just ended, Spriha’s distribution had pretax earnings from operations of$2,290,000. In addition, during the year it received $50,000 in income from interest on bonds &received $88,000 in income from dividend on common stock holding in Microsoft. Spriha’sdistribution company is in the 40% tax bracket & is eligible for 80% dividend exclusion.*Interest income received by the company is treated as ordinary income.a. Find the tax and after-tax amount attributable to the interest income.b. Find the tax and after-tax amount attributable to the dividend income.
During the year just ended, Spriha’s distribution had pretax earnings from operations of $2,290,000. In addition, during the year it received $150,000 in income from interest on bonds & received $88,000 in income from dividend on common stock holding in Microsoft. Spriha’s distribution company is in the 40% tax bracket & is eligible for 70% dividend exclusion.*Interest income received by the company is treated as ordinary income.
a. Find the tax and after-tax amount attributable to the interest income.b. Find the tax and after-tax amount attributable to the dividend income
Edna Recording Studios, Inc., reported earnings available to common stock of $4,200,000last year. From those earnings, the company paid a dividend of $1.28 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 30% debt, 15% preferred stock, and 55% common stock. It is taxed at a rate of 21%.
a. If the market price of the common stock is $46 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, what is the company's cost of retained earnings financing?
b. If underpricing and flotation costs on new shares of common stock amount to $7 per share, what is the company's cost of new common stock financing?
c. The company can issue $2.01 dividend preferred stock for a market price of $34 per share. Flotation costs would amount to $4 per share. What is the cost of preferred stock financing?
d. The company can issue $1,000-par-value, 8% annual coupon, 5-year bonds that can be sold for…
Chapter 1 Solutions
MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
Ch. 1.1 - What is the goal of the firm and, therefore, of...Ch. 1.1 - For what three main reasons is profit maximization...Ch. 1.1 - What is risk? Why must financial managers consider...Ch. 1.1 - Is maximizing shareholder wealth inconsistent with...Ch. 1.2 - What are the main types of decisions that...Ch. 1.2 - Prob. 1.6RQCh. 1.2 - Prob. 1.7RQCh. 1.2 - What are the major differences between accounting...Ch. 1.2 - Prob. 1.9RQCh. 1.3 - Prob. 1.10RQ
Ch. 1.3 - Prob. 1.11RQCh. 1.3 - What does it mean to say that corporations face a...Ch. 1.3 - Prob. 1.13RQCh. 1.3 - Prob. 1.14RQCh. 1.3 - Prob. 1.15RQCh. 1 - Learning Goal 4 ST1-1 Emphasis on Cash Flows...Ch. 1 - Prob. 1.1WUECh. 1 - Prob. 1.2WUECh. 1 - Learning Goal 4 E1-3 The end-of-year parties at...Ch. 1 - You have been made treasurer for a day at AIMCO,...Ch. 1 - Recently, some branches of Donut Shop, Inc., have...Ch. 1 - Ross Company, a manufacturer of pharmaceuticals,...Ch. 1 - Prob. 1.1PCh. 1 - Prob. 1.2PCh. 1 - Cash flows It is typical for Jane to plan,...Ch. 1 - Marginal cost-benefit analysis and the goal of the...Ch. 1 - Identifying agency problems, costs, and...Ch. 1 - Corporate taxes Tantor Supply, Inc., is a small...Ch. 1 - Prob. 1.7PCh. 1 - Prob. 1.8PCh. 1 - Prob. 1.9PCh. 1 - Interest versus dividend expense Michaels...Ch. 1 - Hemingway Corporation is considering expanding its...Ch. 1 - Prob. 1.12PCh. 1 - Prob. 1SE
Knowledge Booster
Similar questions
- Determine how much of the distribution is taxed as dividend income and how much is a return of capital. The IB corp has accumulated E&P of $20000 on 1/1/20xx. During the year there is a deficit in E &P of $30000 earned evenly through out the year. On July 1, of 20xx BI corp. Distributes $12000 in cash to Maximo it's only shareholder.arrow_forwardFor the year just ended, ThruCast Corp. had pretax earnings from operations of $1.25 million. In addition, it received $110,000 in interest income from bonds it held in XrayTech and it received $65,000 in dividend income from its 8% common stock holding in Books-R-Us Corp. What is the total tax liability for ThruCast Corp. for the year? $299,114 $239,400 $292,425 $262,500arrow_forwardFilament Recording Studios, Inc., reported earnings available to common stock of $4,200,000 last year. From those earnings, the company paid a dividend of $1.26 on each of its 1,000,000 common shares outstanding. The capital structure of the company includes 40% debt, 10% preferred stock, and 50% common stock. It is taxed at a rate of 40%. A. If the market price of the common stock is $40 and dividends are expected to grow at a rate of 6% per year for the foreseeable future, what is the company’s cost of retained earnings financing? Format: 1.11% B. If underpricing and flotation costs on new shares of common stock amount to $7.00 per share, what is the company’s cost of new common stock financing? Format: 11.11% C. The company can issue $2.00 dividend preferred stock for a market price of $25.00 per share. Flotation costs would amount to $3.00 per share. What is the cost of preferred stock financing? Format: 1.11% D. The company can issue $1,000-par-value, 10% coupon, 5-year bonds…arrow_forward
- (Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $4.4 million. Gross profits totaled $1.08 million, and operating and depreciation expenses were $507,000 and $359,000, respectively. Dividend income for the year was $14,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, LOADING…, to Comcute the corporation's tax liability. What are the firm's average and marginal tax rates?arrow_forward(Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $4.2 million. Gross profits totaled$1.09 million, and operating and depreciation expenses were $503,000 and $360,000, respectively. Dividend income for the year was $11,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, LOADING..., to Comcute the corporation's tax liability. What are the firm's average and marginal tax rates? What is the firm's tax liability amount for the year is? (Round to the nearest dollar.)arrow_forward(Corporate income tax) Sales for J. P. Hulett Inc. during the past year amounted to $3.5 million. Gross profits totaled $1.01 million, and operating and depreciation expenses were $494,000 and $347,000, respectively. Dividend income for the year was $13,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, to Comcute the corporation's tax liability. What are the firm's average and marginal tax rates? The firm's tax liability for the year is $. (Round to the nearest dollar.) The firm's average tax rate is%. (Round to two decimal places.) The firm's marginal tax rate is %. (Round to the nearest integer.) 3 E D C 80 $ 4 R F DOD 000 F4 V % 5 T FS B A 6 Y MacBook Air F6 H & 7 N Data table Marginal Tax Rate 15% 25% 34% 39% $335,001-$10,000,000 34% $10,000,001-$15,000,000 35% $15,000,001-$18,333,333 38% Over $18,333,333 35% (Click on the icon in order to copy its contents into a spreadsheet.) 44 F7 D J * 8 Taxable…arrow_forward
- helparrow_forwardSun Company has an after-tax net income of $20,000, and the income tax rate is 35%. During the year, Sun Company records a $5,000 unrealized gain on its available-for-sale securities. What is Sun Company's comprehensive income for the year?arrow_forwardBanana Company reports current year E&P of $1,300,000 and accumulated E&P at the beginning of the year of $1,200,000. Banana Company distributed $3,400,000 to its shareholders on the last day of the year. Tax basis in her Banana stock before the distribution is $500,000. a) How much of the $3,400,000 distribution is treated as a dividend? b) What is the tax basis in Banana Company stock after the distribution (assume a single shareholder owns all stock)? c) What is Banana Company's accumulated E&P on the first day of next year? d) How much of the $3,400,000 distribution is treated as capital gain? he Cranberry Corporating.arrow_forward
- Valiant Corp is a C corporation that earned $5.2 per share before it paid any taxes. Valiant Corp. retained $1 of after-tax earnings for reinvestment and distributed what remained in dividend payments. Assume that the corporate tax rate was 32% and dividend earnings were taxed at 12.2%. The value of the dividend earnings received after- tax by a holder of 99,960 shares of Valiant Corp. is $_______.(round your answer to two decimal places) Answer: 222 571.74arrow_forwardSales for J. P. Hulett Inc. during the past year amounted to $4.3 million. Gross profits totaled $1.06 million, and operating and depreciation expenses were $493,000 and $357,000, respectively. Dividend income for the year was $11,000, which was paid by a firm in which Hulett owns 85 percent of the shares. Use the corporate tax rates shown in the popup window, Taxable Income Marginal Tax Rate $0−$50,000 15% $50,001−$75,000 25% $75,001−$100,000 34% $100,001−$335,000 39% $335,001−$10,000,000 34% $10,000,001−$15,000,000 35% $15,000,001−$18,333,333 38% Over $18,333,333 35% to Comcute the corporation's tax liability. What are thefirm's average and marginal tax rates?arrow_forwardThe following information relates to the operations of Branded Ltd. The net profit after tax was $1,000,000. The company distributed ordinary dividends of $600,000 to its shareholders. Over the year, weighted average number of ordinary shares were 2,000,000. Ordinary shares are currently selling for $8.00 per share. What is the dividend pay-out rate for the company? 60% 47.5% 50% 166.67%arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT