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Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $30,000 for the current year. Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. a. How much better off would Kristen be if she were paid a dividend rather than salary? If Kristen were paid a bonus, she would receive $ receive $ after taxes. If Kristen receives a dividend rather than salary, she would after taxes. Thus, she would be better off by receiving the b. How much better off would Egret Corporation be if it paid Kristen a salary rather than a dividend? The net after-tax cost of the bonus for Egret Corporation would be $ Therefore, Egret would be better off by S d. What should Kristen do? and the net after-tax cost for the dividend would be c. Assume Egret Corporation paid Kristen a salary bonus of $35,000 instead of a $30,000 dividend. If Egret Corporation were to pay Kristen a salary bonus of $35,000 instead of a $30,000 dividend, Kristen would receive $ after taxes. The bonus would cost Egret Corporation $ after taxes. Both Egret Corporation and Kristen are better off with a if it paid the

Kristen, the president and sole shareholder of Egret Corporation, has earned a salary bonus of $30,000 for the current year, Because of the lower tax rates on qualifying dividends, Kristen is considering substituting a dividend for the bonus. Assume that the tax rates are 24% for Kristen and 21% for Egret Corporation. a. How mach better off would Kristen be if she were pand a dividend rather than salary? If Kristen were paid a bonus, she would recerve 4 after taxes. If Kristen receives a dividend rather than salary, she would recerve after taxes. Thus, she would be better off by receiving the b. How much better off would Egret Corporation be if it paid Kristen a salary rather than a dividend? The net after-tax cost of the bonus for Egret Corporation would be 5 and the net after-tax cost for the dividend would be - Therefore, Egret would be better off by if it paid the C. Assume Egret Corporation pand Kristen a salary bonus of $35,000 instead of a $30,000 drvidend: If Egret Corporation were to pay Kristen a salary bonus of $35,000 instead of a $30,000 dividend, Kristen would recerve $ after taxes. The bonus would cost Egret Corporation after tanes. d. What should Kristen do? Both Egret Corporation and Kristen are better off with a

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