Question

QUESTION 11 A fund has $863 million dollars of assets, $37 million of liabilities, and 14 million shares outstanding. During the year the fund made qualified dividend distributions of $2.3 per share, long term capital gains distributions of $1, and short-term capital gains distributions of $1.9. What is the after-tax distribution yield, if your marginal income tax rate is 35%, and your long term capital gains tax rate (which also applies to qualified dividends) is 15%? Enter answer in percents, accurate to two decimal places. Extra: How does that compare with pre-tax yield? What are the criteria for dividends to be "qualified" under current tax laws?

Answer 1

C D 1 NAV (assets liabilities)/no. of shares outstanding A В Е F G н $59.00 2 3 To compute pretax yield, we will add the pretax earnings and divide by NAV 4 pretax earning 5.2 Pretax earnings / NAV Pretax yield 6 8.81 % $4.04 post tax earning 8 After tax yield Post tax earnings/ NAV 6.85% 10 Qualified dividerld is a dividend that is taxed at the long term capital gains rate which is generally lower than slab rate Nm n co O

A 1 NAV (assets liabilities)/ no. of shares outstanding (863000000-37000000)/14000000 2 3 To compute pretax yield, we will add the pretax earnings and divide by NAV - 2.3+1+ 1.9 4 pretax earning Pretax yield Pretax earnings /NAV +B4/B2 6 7 ((2.3 (1-0.15))+(1*(1-0.15))+(1.9* (1-0.35))) post tax earning Post tax earnings/ NAV 8 After tax yield +B7/B2 10 Qualified dividend is a dividend that is taxed at the long term capital gains rat 11 12