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Posted by on Friday, July 25, 2008 at 12:45pm.

Assuming a tax rate of 50%, the after-tax cost of a $200,000 dividend payment is?

A. $200,000
B. $100,000
C. $-100,000
D. none of the above

please talk me through this one ...I am completely lost

  • finance dividend payment - , Friday, July 25, 2008 at 1:12pm

    I had a light bulb go off above my head.

    this question is not about the math or numbers...it is a play on words.....

    the after-tax cost of $200,000 dividend ......after-tax is the key

    the only way to get to $200,000 after-tax of 50% is to have $400,000 or more before taxes, so the after-tax cost of a $200,000 dividend payment is $400,000 or more.

    Then answer must be D...none of the above....is this correct???

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