# Devry Keller Graduate School FIN 515 Week 1 Assignment Paper

Topics: Progressive tax, Taxation, Income tax Pages: 2 (323 words) Published: March 23, 2014
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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

Income\$365,000
Less Interest deduction(50,000)
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)
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...