Wigdor Manufacturing Is Currently All Equity Financed,has an EBIT of $2

question 61

Essay

Wigdor Manufacturing is currently all equity financed,has an EBIT of $2 million,and is in the 34% tax bracket. Louis,the company's founder,is the lone shareholder.
Assume that all earnings are paid out as dividends. Now consider the fact that Louis must pay personal tax on the firm's cash flow. Louis pays taxes on interest at a rate of 33%,but pays taxes on dividends at a rate of 28%. Calculate the total cash flow to Louis after he pays personal taxes.

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Definitions:

Relative Frequency Distribution

A representation that shows the proportion or percentage of observations within a dataset that fall within particular intervals or categories.

Relative Frequency Histogram

A type of histogram that displays the proportion or percentage of observations within various categories or intervals.

Relative Frequency Histogram

A type of histogram that displays the relative frequencies (proportions or percentages) of values within a dataset.

Histogram

A graphical representation of the distribution of numerical data, where the data is divided into bins and the frequency of data in each bin is represented by the height of the bar.