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September 5, 2015

Homework Help: Finance (after-tax cost)

Posted by Jason on Saturday, July 26, 2008 at 4:04am.

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

O.K., given a $200,000 after-tax dividend payment and a 50% tax bracket. That means the company had at least $400,000 or more before taxes.

The after-tax cost of a $200,000 dividend payments could be $200,000 or more.

I think the answer is A or D, could you guide me toward the correct answer?

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