What is your dividend tax rate if you earn an annual income of $150,000?
CF Case 34: The Wm. Wrigley Jr. Company

Quiz
•
Business
•
University
•
Hard

Russell Phua
Used 2+ times
FREE Resource
6 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
20 sec • 20 pts
27.5%
30.5%
35.5%
39.1%
2.
MULTIPLE SELECT QUESTION
20 sec • 20 pts
What causes Td* to differ across investors?
Varying income levels
Differing investment horizons
Tax jurisdiction
Type of investment account
3.
MULTIPLE CHOICE QUESTION
45 sec • 20 pts
If you earn an annual income of $60,000 and have an investment horizon of 3 years, which payout policy would you prefer?
Share repurchase
Dividends
Indifferent
Answer explanation
An annual income of $60,000 results in a marginal income tax rate of 27.5%
Since dividend tax = marginal income tax rate = 27.5%, and investment horizon = 3 years, the corresponding capital gains tax = 20.0%
Thus, an investor of this profile would prefer a share repurchase
4.
MULTIPLE CHOICE QUESTION
45 sec • 20 pts
If you earn an annual income of $40,000 and have an investment horizon of 8 months, which payout policy would you prefer?
Share repurchase
Dividends
Indifferent
Answer explanation
An annual income of $40,000 results in a marginal income tax rate of 27.5%
Since dividend tax = marginal income tax rate = 27.5%, and investment horizon = 8 months, the corresponding capital gains tax = 27.5%
Thus, an investor of this profile would be indifferent between both options
5.
MULTIPLE CHOICE QUESTION
45 sec • 20 pts
Assuming that you have an annual income of $150,000, and an investment horizon of 5.5 years, what is your effective dividend tax rate?
9.4%
13.1%
19.4%
23.9%
Answer explanation
An annual income of $150,000 results in a marginal income tax rate of 35.5%
Since dividend tax = marginal income tax rate = 35.5%, and investment horizon = 5.5 years, the corresponding capital gains tax = 20.0%
As such, Td*
= (0.355 - 0.20)/(1 - 0.20)
= 0.19375 or 19.4%
6.
MULTIPLE CHOICE QUESTION
45 sec • 20 pts
Assuming that you have an annual income of $110,000 and an investment horizon of 3 years, what is your effective dividend tax rate?
9.4%
13.1%
19.4%
23.9%
Answer explanation
An annual income of $110,000 results in a marginal income tax rate of 30.5%
Since dividend tax = marginal income tax rate = 30.5%, and investment horizon = 3 years, the corresponding capital gains tax = 20.0%
As such, Td*
= (0.305 - 0.20)/(1 - 0.20)
= 0.13125 or 13.1%
Similar Resources on Wayground
7 questions
Equtiy Shares

Quiz
•
University
10 questions
Chapter 4

Quiz
•
University
10 questions
Statement of Cash Flow

Quiz
•
University
10 questions
Economic management

Quiz
•
University
10 questions
CAPITAL BUDGETING

Quiz
•
University
10 questions
Reclass and Investment Property Review

Quiz
•
University
10 questions
PENDAPATAN NASIONAL KELAS XI

Quiz
•
12th Grade - University
10 questions
IAS 7 STATEMENT OF CASH FLOWS

Quiz
•
University
Popular Resources on Wayground
25 questions
Equations of Circles

Quiz
•
10th - 11th Grade
30 questions
Week 5 Memory Builder 1 (Multiplication and Division Facts)

Quiz
•
9th Grade
33 questions
Unit 3 Summative - Summer School: Immune System

Quiz
•
10th Grade
10 questions
Writing and Identifying Ratios Practice

Quiz
•
5th - 6th Grade
36 questions
Prime and Composite Numbers

Quiz
•
5th Grade
14 questions
Exterior and Interior angles of Polygons

Quiz
•
8th Grade
37 questions
Camp Re-cap Week 1 (no regression)

Quiz
•
9th - 12th Grade
46 questions
Biology Semester 1 Review

Quiz
•
10th Grade