Windsor Windows earns $4.50 per share before taxes.The corporate tax rate is 30%,the personal tax rate on dividends is 15%,and the personal tax rate on non-dividend income is 40%.What is the total amount of taxes paid per share if the company pays a $2.00 dividend but all of the shares are held in a tax-free savings account?

Question

Quizplus · Accepted Answer

First, we need to calculate the amount of taxes that the company pays on its earnings per share:

Taxes on earnings = 0.3 x (4.50) = 1.35

Then, the company pays a $2.00 dividend per share, but since all the shares are held in a tax-free savings account, there are no taxes on the dividend.

Therefore, the total amount of taxes paid per share is the taxes on earnings only, which is $1.35.

Windsor Windows Earns $4