A & K Co.expects to have earnings before taxes of $250,000 to $300,000.The company's marginal tax rate is 39% and its average tax rate about 33%.For every additional dollar A & K pays out in common dividends,its income tax liability will
A)increase by 39 cents.
B)fall by 39 cents.
C)be unaffected.
D)fall by about 33 cents.

Question

Quizplus · Accepted Answer

Dividends paid to shareholders do not affect a company's taxable income, so the income tax liability remains unaffected by dividend payments.

A & K CoExpects to Have Earnings Before Taxes of $250,000 to $300,000