ValiantCorp is a C corporation that earned$ 3.90 per share before it paid any taxes. ValiantCorp retained $1 of after tax earnings forreinvestment, and distributed what remained in dividend payments. If the corporate tax rate was 35%
and dividend earnings were taxed at 12.5%, what was the value of the dividend earnings received after tax by a holder of 100,000 shares of ValiantCorp?

the investor wil receive a net of 87,500 dollar after the taxation on diviends.

Explanation:

we are given with the after-tax distribution for the company at $1 dollar per share

100,000 shares x $1 each = $100,000 cash dividends

then we apply the dividends earnings taxation to solve for how much is the after tax cash received by the holder:

$100,000 x (1 - 0.125) = $87,500

$134,312.50

Explanation:

first of all we have to calculate the corporate taxes that ValiantCorp owes:

$3.90 x 35% x 100,000 shares = $136,500

net income = $390,000 - $136,500 = $253,500

net income per stock = $2.53¹/²

since the corporation retains $1 per stock for reinvestment, it will distribute $1.53¹/² per stock x 100,000 stocks = $153,500

the stockholders will receive $153,500 x (1 - 12.5%) = $134,312.50

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