Assuming a tax rate of 50%, the after-tax cost of a $200,000 dividend payment is?
A. $200,000
B. $100,000
C. $-100,000
D. none of the above
O.K., given a $200,000 after-tax dividend payment and a 50% tax bracket. That means the company had at least $400,000 or more before taxes.
The after-tax cost of a $200,000 dividend payments could be $200,000 or more.
I think the answer is A or D, could you guide me toward the correct answer?
To calculate the after-tax cost of a dividend payment, you need to consider the tax rate and deduct the corresponding taxes from the payment.
In this case, the tax rate is 50%, so you would subtract 50% of the dividend payment from the original amount.
$200,000 * 50% = $100,000
Therefore, the after-tax cost of a $200,000 dividend payment, assuming a 50% tax rate, is $100,000.
The correct answer is B. $100,000.