Devry Keller Graduate School FIN 515 Week 1 Assignment Paper
Homework
(2-6) Statement of Retained Earnings
In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year?
Answer:
NI = $50,000,000; R/EY/E = $810,000,000; R/EB/Y = $780,000,000; Dividends = ? R/EB/Y + NI – Div = R/EY/E $780,000,000 + $50,000,000 – Div = $810,000,000 $830,000,000 – Div = $810,000,000 $20,000,000 = Div.
(2-7) Corporate Tax Liability
The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000, and (4) income taxes. What are the firm’s income tax liability and its after-tax income? What are the company’s marginal and average tax rates on ta Answer:
Income $365,000
Less Interest deduction (50,000)
Plus: Dividends received 4,500
Taxable income $319,500
For a corporation, 70% of dividends received are excluded from taxes; therefore, taxable dividends are calculated as $15,000(1 - 0.70) = $4,500.
Tax = $22,250 + ($319,500 - $100,000)(0.39) = $22,250 + $85,605 = $107,855. After-tax income:
Taxable income $319,500
Taxes (107,855)
Plus Non-taxable dividends received 10,500
Net income $222,145
Non-taxable dividends are calculated as $15,000 x 0.7 = $10,500.
The company’s marginal tax rate is 39 percent. The company’s average tax rate is $107,855/$319,500 = 33.76%.
(2-9) Corporate After-Tax Yield
The Shrieves Corporation has $10,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 7.5%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6%. Shrieves’s corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the
(2-6) Statement of Retained Earnings
In its most recent financial statements, Newhouse Inc. reported $50 million of net income and $810 million of retained earnings. The previous retained earnings were $780 million. How much in dividends was paid to shareholders during the year?
Answer:
NI = $50,000,000; R/EY/E = $810,000,000; R/EB/Y = $780,000,000; Dividends = ? R/EB/Y + NI – Div = R/EY/E $780,000,000 + $50,000,000 – Div = $810,000,000 $830,000,000 – Div = $810,000,000 $20,000,000 = Div.
(2-7) Corporate Tax Liability
The Talley Corporation had a taxable income of $365,000 from operations after all operating costs but before (1) interest charges of $50,000, (2) dividends received of $15,000, (3) dividends paid of $25,000, and (4) income taxes. What are the firm’s income tax liability and its after-tax income? What are the company’s marginal and average tax rates on ta Answer:
Income $365,000
Less Interest deduction (50,000)
Plus: Dividends received 4,500
Taxable income $319,500
For a corporation, 70% of dividends received are excluded from taxes; therefore, taxable dividends are calculated as $15,000(1 - 0.70) = $4,500.
Tax = $22,250 + ($319,500 - $100,000)(0.39) = $22,250 + $85,605 = $107,855. After-tax income:
Taxable income $319,500
Taxes (107,855)
Plus Non-taxable dividends received 10,500
Net income $222,145
Non-taxable dividends are calculated as $15,000 x 0.7 = $10,500.
The company’s marginal tax rate is 39 percent. The company’s average tax rate is $107,855/$319,500 = 33.76%.
(2-9) Corporate After-Tax Yield
The Shrieves Corporation has $10,000 that it plans to invest in marketable securities. It is choosing among AT&T bonds, which yield 7.5%, state of Florida muni bonds, which yield 5% (but are not taxable), and AT&T preferred stock, with a dividend yield of 6%. Shrieves’s corporate tax rate is 35%, and 70% of the dividends received are tax exempt. Find the