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An Australian company earns $8.50 per share before taxes. It will distribute half (50%) of its...

An Australian company earns $8.50 per share before taxes. It will distribute half (50%) of its earnings to shareholders as dividends. The corporate tax rate is 28.5% and you are on a personal tax rate of 32.5%. Calculate the net amount of dividend you will receive from your investment in Frankie Limited, after adjusting for all tax effects.

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Answer #1

Company's earning per share before taxes .................... $8.50

Corporate tax per share (@28.5%) .....$8.50*28.5%........ ($2.42)

  

Company's earning per share after taxes $6.08

Individual's earning

Dividend per share (@ 50%) ....... $6.08 * 0.5 .................$3.04

Tax on dividend ............................. $3.04* 32.5%.............($0.99)

     

Net amount of dividend received ................................. $2.05

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