A Parent Holding Company Sells Shares in Its Subsidiary Such

question 1

Multiple Choice

A parent holding company sells shares in its subsidiary such that the parent now owns only 65% of the subsidiary and,thus,the tax returns of the parent and its subsidiary can't be consolidated.The parent receives annual dividends from the subsidiary of $2,500,000.If the parent's marginal tax rate is 34% and if the exclusion on intercompany dividends is 70%,what is the effective tax rate on the intercompany dividends,and how much net dividends are received?

• A) 10.2%;$2,245,000
• B) 10.2%;$2,135,000
• C) 23.8%;$1,905,000
• D) 10.2%;$1,750,000
• E) 34.0%;$1,650,000

Understand the concept of opportunity costs and how they are composed of both explicit and implicit costs.

Differentiate between explicit costs and implicit costs, including examples of each.

Calculate and differentiate between accounting profits and economic profits.

Understand the concept of the marginal product of labor and how it relates to the production function.