XYZ Inc. has US$6,000 after taxes to distribute as dividend or reinvest in the company....
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XYZ Inc. has US$6,000 after taxes to distribute as dividend or reinvest in the company. If it decides to pay dividend, you will have to pay tax at the rate of 25% per annum. You can invest your post-tax receipts at the rate of 7% per annum. If XYZ decides to reinvest the money in the firm, the money can still grow at a rate of 5% per annum. The corporate tax rate is 40% per annum. What is the capital gain if the dividend was paid out and reinvested?
Select one:
a. $245.50
b. $187.50
c. $135.00
d. $315.00
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