Question 449 personal tax on dividends, classical tax system
A small private company has a single shareholder. This year the firm earned a $100 profit before tax. All of the firm's after tax profits will be paid out as dividends to the owner.
The corporate tax rate is 30% and the sole shareholder's personal marginal tax rate is 45%.
The United States' classical tax system applies because the company generates all of its income in the US and pays corporate tax to the Internal Revenue Service. The shareholder is also an American for tax purposes.
What will be the personal tax payable by the shareholder and the corporate tax payable by the company?
Total cash flows can be broken into income and capital cash flows. What is the name given to the income cash flow from owning shares?
The following cash flows are expected:
- 10 yearly payments of $80, with the first payment in 6.5 years from now (first payment at t=6.5).
- A single payment of $500 in 4 years and 3 months (t=4.25) from now.
What is the NPV of the cash flows if the discount rate is 10% given as an effective annual rate?
Question 624 franking credit, personal tax on dividends, imputation tax system, no explanation
Which of the following statements about Australian franking credits is NOT correct? Franking credits:
You intend to use futures on oil to hedge the risk of purchasing oil. There is no cross-hedging risk. Oil pays no dividends but it’s costly to store. Which of the following statements about basis risk in this scenario is NOT correct?
Question 852 gross domestic product, inflation, employment, no explanation
When the economy is booming (in an upswing), you tend to see:
Which of the following statements about Macaulay duration is NOT correct? The Macaulay duration:
Question 950 future, backwardation
Question 976 comparative advantage in trade, production possibilities curve, no explanation
Arthur and Bindi are the only people on a remote island. Their production possibility curves are shown in the graph.
Which of the following statements is NOT correct?
Question 984 principal agent problem, moral hazard, asymmetric information, no explanation
When does the ‘principal-agent problem’ occur? Is it when:
I. The principal has conflicting incentives (moral hazard);
II. The agent has conflicting incentives (moral hazard);
III. The principal has incomplete information about the agent (asymmetric information); or
IV. The agent has incomplete information about the principal (asymmetric information)?
The principal-agent problem occurs when statements: