You are a shareholder of ABC Corporation. The corporation paid a $0.7 fully-franked annual cash dividend per share. The corporate tax rate is 38%, and the personal tax rate on (both dividend and non-dividend) income is 42%. How much is the franking credit (per share) an investor would get under the imputation tax system? (Round your answer in dollars to 2 decimal places

To calculate the franking credit under the imputation tax system, we can use the formula:

\[
\text{Franking Credit} = \frac{\text{Dividend} \times \text{Corporate Tax Rate}}{1 - \text{Corporate Tax Rate}}
\]

Where:
- The dividend is $0.70 (fully franked),
- The corporate tax rate is 38% or 0.38.

Now, applying the formula:

\[
\text{Franking Credit} = \frac{0.70 \times 0.38}{1 - 0.38}
\]

Let me calculate this.The franking credit per share that an investor would receive under the imputation tax system is $0.43.

Do you want more details or have any questions about this calculation?

Here are 5 related questions to consider:
1. How is the imputation tax system different from a classical tax system?
2. How does the personal tax rate affect the overall dividend income for shareholders?
3. What happens if an individual's tax rate is lower than the corporate tax rate?
4. How do franking credits benefit investors in a tax-sheltered account?
5. How would a change in the corporate tax rate affect the franking credit calculation?

**Tip**: The franking credit is designed to prevent double taxation on dividends—once at the corporate level and again at the personal level.

You are a shareholder of ABC Corporation. The corporation paid a $0.7 fully-franked annual cash dividend per share. The corporate tax rate is 38%, and the personal tax rate on (both dividend and non-dividend) income is 42%. How much is the franking credit (per share) an investor would get under the imputation tax system? (Round your answer in dollars to 2 decimal places)

Learn how to calculate the franking credit per share for an investor in ABC Corporation using the imputation tax system. This problem involves calculating a franking credit based on a $0.7 fully-franked dividend, a 38% corporate tax rate, and a 42% personal tax rate. Suitable for business and finance students.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation