Miss Natalia

(14)

$20/per page/Negotiable

About Miss Natalia

Levels Tought:
Elementary,High School,College,University

Expertise:
Accounting,Business & Finance See all
Accounting,Business & Finance,Calculus,Computer Science,Environmental science,Health & Medical Hide all
Teaching Since: Apr 2017
Last Sign in: 268 Weeks Ago, 4 Days Ago
Questions Answered: 6064
Tutorials Posted: 6070

Education

  • Doctor of Education in Educational Leadership with a Specialization in Educational Technology
    Phoniex University
    Oct-1999 - Nov-2005

Experience

  • HR Executive
    a21, Inc.
    Nov-1998 - Dec-2005

Category > Business & Finance Posted 18 May 2017 My Price 5.00

What is the total aftertax cash flow to shareholders if the company invests in T-bills?

National Business Machine Co. (NBM) has $3 million of extra cash after taxes have been paid. NBM has two choices to make use of this cash. One alternative is to invest the cash in financial assets. The resulting investment income will be paid out as a special dividend at the end of three years. In this case, the firm can invest in Treasury bills yielding 2 percent or in 4 percent preferred stock. IRS regulations allow the company to exclude from taxable income 70 percent of the dividends received from investing in another company’s stock. Another alternative is to pay out the cash now as dividends. This would allow the shareholders to invest on their own in Treasury bills with the same yield, or in preferred stock. The corporate tax rate is 38 percent. Assume the investor has a 31 percent personal income tax rate, which is applied to interest income and preferred stock dividends. The personal dividend tax rate is 20 percent on common stock dividends.



 

Suppose the company reinvests the $3 million and pays a dividend in three years.



 

What is the total aftertax cash flow to shareholders if the company invests in T-bills? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)



 

  Value in three years $   



 

What is the total aftertax cash flow to shareholders if the company invests in preferred stock? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)



 

  Value in three years $   



 

Suppose instead that the company pays a dividend of $3 million now and the shareholder reinvests the dividend for three years.



 

What is the total aftertax cash flow to shareholders if the shareholders invest in T-bills? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)



 

  Value in three years $   



 

What is the total aftertax cash flow to shareholders if the shareholders invest in preferred stock? (Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)



 

  Value in three years $   
 

Answers

Miss Natalia
(14)
Status NEW Posted 18 May 2017 08:05 AM My Price 5.00

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