Question

A fund has $878 million dollars of assets, $21 million of liabilities, and 13 million shares outstanding. During the year the fund made qualified dividend distributions of $2.9 per share, long term capital gains distributions of $1.6, 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

solution NAV = = = ( assets - liabilities) (no. of shares outstanding ( 878 000 000 - 20000000) / 13000000 65.92 To compute pretay yield, we will add the poretax earnings and divide by NAV.

Pretax earnings = 2.9 + 1.6 + 1.9 = 6.40 pretax field = pretax earnings / NAV = = 6.40 / 65.92 9.70 % 9. 70 % post tay earnings = 2.9 *(1-0.15) + 1.6% (-0.15) +1-96(1-0.35) - 2.465 + 1.36 +1,235 5:06 After Tax Yield = - post tax earnings / NAV 5.06/ 615.92 T. 67 y. Qualified devidend is a devidend capital gains bate which is that is generally taxed at the long team lower than slab rate.