Assume That All Earnings Are Paid Out as Dividends

question 3

Essay

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.(Challenge problem; covered in text problems 9 and 10)

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Definitions:

Cards

Small pieces of laminated paper or plastic printed with a number, symbol, or illustration, used for playing games, as a medium of exchange, or for identification.

Probability

A statistical concept that quantifies the chance of a given event occurring, often expressed as a ratio or percentage.

Cards

Pieces of thick, flat material, often made of paper or plastic, used for various games, information storage, or special occasions.

All Aces

A term often used to describe a situation, hand, or outcome that is the best possible under the circumstances.