: Use the data in the table EE. a. 1998 to calculate the tax disadvantage of ret

Question

: Use the data in the table EE. a. 1998 to calculate the tax disadvantage of retained cash in Data Table b. 1976 a. 1998 The tax disadvantage of retained cash in 1998 is b. 1976 The tax disadvantage o retained cash in 1976 is (Clok on the con loced on the hop-right cormer of the data table below in order to copy its contents taapeacenet) % (Round to two decimal places) Top Federal Tax Rates in the United States Average Rate on Equity Income valaCorporate InterestA DividendsGains Tax Rateli Income 70% % (Round to hwo decimal places ) 70% 70% 35% 20% 28% 71-19 1979-1981 46% 1982 1906 46% 1987 1988-1990 ili 34% 1991-1992 i 34% 1993-1996 | 35% 1997-2000 35% 2001-2002 35% 2003-2012 35% 53% 49% 35% 33% 28% 30% 39% 28% 31% 40% 31% 28% 20% 39% 15% 15% 15% Print Done

Explanation / Answer

The value of tax disadvantage of retaining cash can be calculated with the use of formula given below:

Tax Disadvantage of Retaining Cash = 1-((1-Corporate Tax Rate)*(1-Capital Gain Rate)/(1-Dividend Rate))

_____

Part a)

Substituting values in the above formula, we get,

Tax Disadvantage of Retaining Cash (1998) = 1-((1-35%)*(1-20%)/(1-40%)) = 13.33% (answer for Part a)

The tax disadvantage of retaining cash in 1998 is 13.33%.

______

Part b)

Substituting values in the above formula, we get,

Tax Disadvantage of Retaining Cash (1976) = 1-((1-48%)*(1-35%)/(1-70%)) = -12.67% (answer for Part b)

The tax disadvantage of retaining cash in 1976 is -12.67%.

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.